Management buy-outs are a great opportunity for a senior management team to become part owners of a business, but each shareholder will have their own set of goals.  It’s vital that a succession plan is put in place very early on in the game to create transparency and trust.

It’s easy to identify those shareholders who have one eye on the business and the other on the door!  They are the quick thinkers, possibly the more risk taking members of the group, who may want to buy up, merge and acquire at a faster pace than the other members are happy to do.

Those other members probably see themselves as long-term “employees” of the business, as well as shareholders.  They like job security that part business ownership gives them.  There is no right or wrong, though cracks can occur when a power struggle starts to take place.

For succession planning in this situation to be a success, a likely recommendation is to pull in an independent third party or parties to act as advisories.  The aim is to ensure both parties achieve a beneficial outcome that they are all happy with.  For those who want to build and sell up and get out, having independent advisors negotiate and facilitate the process allows for a smoother transition period.

For those who wish to stay on board, then advisors can assist with capital management and strategic planning to allow for the continuity of the business. Even for those who want to stay in the business it’s key to identify early on strong managers who can at some point take on greater responsibility.  Training and development for these managers is a wise investment for any sustainable and profitable business.

Succession planning isn’t just an exit strategy it can also be a time to grow and develop a business, so staff, shareholders and customers all get the best deal.  Whether you want to retire or just move on to something new, the only way to successfully achieve this is to plan ahead.

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To allow for a smooth transition, succession planning needs a strategy and sooner than most people think.

First of all you have to identify what succession planning looks like to you. What is your vision in 2, 3 or 5 years time for you and your business? Do you want more free time but still remain hands on in your business? Do you want to completely let go in 5 years time and try something completely new, with a nice padding of capital in your back pocket?

Whether thinking of moving out or moving people up, you need a plan.

Whether you are in a family business, a small business or part of a larger shareholder group, it’s important to set clear objectives and goals for the future. We tend to get caught up in the focus of constantly increasing profit, building revenue, and improving cashflow but at some stage it’s important to take time out and look a bit further ahead.

If you are after more freedom, what are you happy to let go of? Who can you trust will carry on the baton and ensure the business still thrives? Who in your senior management team has the skills and leadership qualities to take on more responsibility or to help you grow your business? Those people in your team may be the future shareholders in your business and if you want your legacy and integrity to stay in your business, choose wisely.

Thankfully, there are professionals who can assist and support business owners with succession planning. It’s a fantastic tool that allows business owners to gain vital insights and look at different opportunities for growth that they may not have explored. What does the future hold for you and you business? Succession planning is planning for success.

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