How to make sure your business survives you
Why bother planning anything? If the last few weeks has taught us anything, unplanned is the new normal.
We’ve had unplanned exits in the last month from David Cameron and George Osborne in politics to Lionel Messi in football, and Chris Evans leaving the BBC’s flagship Top Gear show. Yes, they had good reasons to step back, but the shock still caused ripples, even though their respective organisations are big enough to survive a high-profile departure.
What about smaller organisations, such as an owner-managed business? The sudden departure of a founding shareholder can damage reputations or unsettle customers, but interestingly 58% of BCMS transactions complete without formal succession plans or pre-defined exit strategies in place, and life carries on pretty much as before for the acquired business.
So if unplanned exits can still deliver a successful result for all involved, what’s the point in spending time and effort planning for the unknown?
Put simply, it’s about business owners building in continuity and motivation as they get closer to stepping back from their company.
A succession plan provides a process to identify and replace key staff and shareholders, and addresses the changes that will occur when they leave. For shareholders, this leads directly to an exit strategy.
An exit strategy is more often fixed by time-sensitive factors such as market conditions, age and health, which informs the preferred transaction type – such as part-sale, trade sale or management buyout.
“So, who’s going to do that when you leave?” You’ll need to answer questions like this. Building confidence is critical with acquirers and investors. In our experience, they are cautious by nature, and want to see good housekeeping around roles and responsibilities before tabling serious offers.
So, it pays for business owners to be risk averse when it comes to selling, and develop a basic understanding of the different transaction types before deciding on a preferred exit route.
BCMS has recently teamed up with wealth managers at Investec and legal experts at Harrison Clark Rickerby to produce a whitepaper to help business owners understand these processes as they evaluate their exit options. Click here to download.