The transition from work to retirement is a major life event. It takes time to become comfortable with this change on a personal level, aside from the often complex challenges of handing over the reins of your business to the next generation.
It brings to mind the iconic BT advertising slogan from the 1980s, “It’s good to talk”, delivered by the late Bob Hoskins. Discussing your plans well ahead of the event with family, your business advisers and personal financial planner will enable you to explore all the options and to gauge the viability of each.
Ideally, putting in place a succession plan at least five years in advance should provide enough time to acclimatise all parties to the approaching transition. It will provide impetus in stepping up the involvement of the next generation while allowing the current leader time to mentally and financially prepare for retirement.
In the case of family businesses a good approach is to form a family council, to bring family members together on a regular basis to consider business strategy and overcome challenges the business may be facing. Through this exercise skill sets and personal attributes will be brought to the fore, indicating who might be best placed for a particular role when the time comes.
Of course, it may be that the next generation don’t want to or aren’t able to run the business. Attention would then turn to other options, such as management buyouts or deferred consideration sale processes, which may enable the existing senior employees to take ownership. Whether it is a family succession or third party sale, there are many ways to structure the handover and advice from your professional team will be essential to obtain the best outcome for all.
Having put in the effort to formulate a plan, the often forgotten step of ensuring that it is future proofed needs to be considered. Questions to consider include:
- Are the key individuals insured?
- Is there an up to date shareholders’ agreement in place?
- Does the business have the investment it needs to remain robust in the absence of a key individual?
- Could the management team keep the business running?
- Has the next leader been identified and are they being prepared now?
The succession plan must also work for those giving up control, and personal financial planning plays a key role in determining if enough financial resources are available to live the life you desire beyond business. Analysing personal assets, proceeds from the business exit or continuing income streams from the business is crucial when determining how you are going to fund your lifestyle in future.
At this juncture you may also be considering how wealth can be passed on to children who aren’t going to be involved in the business. Understanding what is possible can be discovered with the help of an experienced financial planner working alongside your business adviser.
One of the most rewarding aspects working at PKF Francis Clark, working with our colleagues at Francis Clark Financial Planning, is guiding clients through this journey to a rewarding and relaxing retirement.
Family Business Connect
The above gives you an idea of areas that may be worth considering, which are all included within our advisory platform, Family Business Connect. With over 350 other areas that our advisers can discuss with a family business we look forward to being able to work through Family Business Connect in a structured way, depending on your own individual circumstances.
At PKF Francis Clark, we have a wealth of experience, having worked with family businesses of all sizes for many years. We look forward to hearing from you.