You’ve spent a lifetime building up your family business, growing the company and creating a lasting legacy for your nearest and dearest.
But all good things must come to an end, and at some point in the future you’ll need to hand the business over to the next generation.
What are the signs that it’s time to step down? And what’s the best time to put your succession plan into action and to pass the reins to your successor?
Stepping back from the business and starting a new life in retirement, or working on a new business idea, probably sounds enticing. But it’s important to have a clear succession plan in place and to pass on the business at the right time.
Here are five options for when the time is right to step back:
When you, the founder are ready.
Your own readiness to step back from the day-to-day operations of the family business is a crucial factor. You need to feel ready to hand over control, be confident in your successor and have a clear understanding of your future role. Will you exit completely, or stay on as an adviser, or board member?
When your successor is ready.
Your chosen successor also needs to be ready. It’s vital for your successor to have the necessary skills, experience and commitment to lead the business. They should also be prepared to take on the responsibilities and challenges of running a family business, through good times and bad.
When the business is looking stable.
Change can be a challenge in any business, so it’s important to initiate this change of leadership when the company is looking strong and stable. This gives you the foundations for a successful transition. Make sure the business is in good financial health, has a strong customer base, and that your market position is looking favourable compared to your close competitors.
When the timing and conditions are right.
Handing the business over during tough market conditions is not advisable. Evaluate external factors such as economic conditions, industry trends and family circumstances and think about whether now is a good time for the transition – or whether it’s better to wait and ride out the storm.
When you have a clear succession plan in place.
A transition from one generation to the other is a complex and often challenging process. There’s real value to having a well-crafted succession plan in place. This plan will outline the transition process, roles and responsibilities, ownership structures and will ensure a smooth transfer of power.
Ending your own personal journey with your family business is a momentous step, and a transfer of power that will run far more smoothly with plenty of pre-planning.
Talk to our team to discuss your plans for the future, your hopes for the business and the key elements that should be included in your exit strategy and succession planning.
At the point of selling your business, getting a good price for the company will be a major goal. A key way to achieve this is to add value to the business as part of your ongoing exit strategy.
In this series, we’ll give you all the advice you need to plan your exit, add value to the business, negotiate a great deal and define your new pathway once the business is sold.
You’ve put blood, sweat and tears into this business. So, you’re going to want to achieve a sale price that reflects this hard work, giving you the funds to start the next phase in your journey.
Your potential buyer will be looking for a profitable, well-run business that can prove it’s a viable enterprise. To do this, it’s vital to look at core ways of improving the attractiveness of the company, gradually adding incremental value and allowing you to negotiate a good price.
Let’s take a look at some important ways to add value to the business:
Increase your profitability
A buyer wants an acquisition that will turn a profit. To boost the company’s profitability, look at improving your margins, reducing costs and increasing revenues. Ways to achieve this can include streamlining your operations, negotiating better deals with suppliers and increasing brand loyalty with your customers.
Strengthen your financial performance
It’s important to run a tight financial ship. Aim for the company to be in a positive cashflow position, reduce your ageing debt and strengthen the balance sheet to demonstrate financial stability. This will mean getting in control of your inventory and spending, being proactive about collecting outstanding receivables and exploring financing options, such as invoice finance or bank loans.
Nurture your customer relationships
Loyal customers spend more and provide a stable pipeline of sales and revenue. Building these strong customer relationships is a critical part of adding value, and can start by providing excellent customer service, offering loyalty programs and actively seeking (and acting on) customer feedback.
Invest in the company’s growth
A growing company is an attractive proposition to any buyer, so it’s important to continue investing in growth. Explore new products, services or markets to expand the business’s potential, add value and show the potential behind your business concept. The R&D, strategic planning and resourcing that’s involved will be an investment that pays off once you have an interested buyer.
Prepare for the due diligence process
Before a buyer makes an offer, they’ll want to carry out due diligence checks on the business. To be ready, you’ll need to get your financial records, contracts and other relevant documents in order, and make sure all the information is easy to find and access. Making these checks simple and straightforward helps potential buyers assess the business’s value and gain confidence in the company.
Talk to us about planning the sale of your business
Making your business more attractive to a potential buyer takes good planning, patience and a real focus on adding value. Starting this value-add process early is vital.
If you want to start adding value to the company, prior to selling up, come and talk to us. Our team can help you deliver an exit strategy that increases value and delivers a great deal.