Our Corporate Finance Partner, Steve Plaskitt, shares his tips on family business succession…
Keeping a family business going is hard work. There are only a few examples of family businesses being passed from generations and still surviving in the present day.
Booths in Cumbria is one such example and one which I am always reminded of when I visit the Lake District. Apart from having the best choice of branded bottled beers in the Lake District (in my humble opinion!), it has been able to survive because it has changed with the times and it has excellent customer service. So far it has been able to halt the spread of the branded supermarkets.
Plan for succession before you reach retirement
Often I am asked to help plan for an exit where the business owner has not planned a way for succession through their family and have reached a point where they hope to retire. Often this is too late – as planning for succession or for continued success is not a priority for business owners when compared to day to day operations.
We are increasingly seeing strong North East business owners planning to hand the business down to their sons and daughters.
For those business owners that are debating whether to pass to the next generation, then they must carefully choose their best option.
Discuss your plans with the family
Firstly, talk to the family and discuss your plans and aspirations with all of them.
If it is affordable to, advise your children to go to university or college or encourage them to do an MBA. Through this they can see a different perspective and way of doing things rather than the existing methods from their parents.
Broaden your service offerings
Seek to diversify the business. The businesses that I have seen in the North East that have continued through generations have been able to diversify and broaden their service offerings often to the same customer base. This has allowed them to keep moving, keep ahead of their competitors and become resilient and relevant to the ever changing market places.
Explore which trusts are available with your accountants and lawyers. Increasingly, family trusts are used as a way to allow the children to be granted a beneficiary of the business and allow for succession. It also allows the family to have some safeguards by putting in restrictions on how the company should operate or how money should be extracted from the company.
Let them see all aspects of the business as part of their training. They can spend a few months working with the marketing team, the finance team, the account managers, the shopfloor, and the IT department to aid their understanding of the variety of skills required in the business. This can allow them to gain a better understanding of the needs of the whole team.
Don’t view the business as your pension fund
View the business as a business and not as your pension fund. This will make it easier for succession as your pension funds are independent of your business and you do not rely upon the sale of the business to facilitate and fund your retirement.
Finally, good advice for all business owners is to take more holidays and allow your management team / next generation to take control of the business for a few days. Even better, if you were to holiday in the Lake District you would be able to enjoy the pleasures of a wide choice of beers at the local supermarket!
If you would like to discuss family business succession in more detail, please contact Steve Plaskitt.