Succession is a journey characterised by transition, and, quite frequently, uncertainty. Having a strong, comprehensive strategy is the best way to ensure a successful result. Understanding your strategy, and the possibilities of different strategies is incredibly important– not to mention comforting in a period of relative tumult.
There are three main successions strategies: internal succession, external succession, and retaining ownership for income during retirement.
Internal succession is a strategy that transfers ownership and control of the business from the existing owners to a new owner, usually from within the business itself. It occasions a transition of roles, and a period of gradual transference, and much collaboration between the business owner, the successor, and the succession specialist. In such a strategy, the main issues to be addressed are valuation, successor capability (or willingness) and funding. Careful consideration over a period of several years is required to maximise success in this strategy.
External succession is a strategy that sells the whole of equity in the business of the business to a new, external owner. In many cases, the business is absorbed into an existing enterprise and infrastructure. Quite often, this results in a change to the operating mode and the replacement of existing staff. The issues that arise from such a strategy tend to be associated with lack of communication and control. Business owners who wish to retain some form of involvement in after sale need to express this desire clearly and formally within the strategy plan, as misunderstandings frequently occur.
The third option for succession tends to be less of a strategy than something that business owners allow to occur. It is a methodology particular to mortgage broking: retaining a business as a source of retirement income. It can be successful, but unless planned appropriately, this is unlikely. Making a considered, informed decision is preferable to simply allowing this informal transition to occur.
Whichever path you eventually follow, there are considerations that must be made across each strategy. Timing is huge factor: regardless of which option you take, beginning early rather than later is never anything but advantageous. Another factor is the formality of planning: concrete plans are at the heart of successful succession results. The final consideration is the responsibility and effort that succession necessitates. In every instance and at every stage, there is support available. At Seaview, we are succession specialists, working to give you the best results from your succession strategy. Our experience and understanding relieve the pressure that this process can bring. Every strategy begins with a conversation: start one with us today.