Moving on

This happens all the time - not just because of Covid-19, but currently, many business owners are re-evaluating their future. If you started the business with the end of your involvement in mind, you're in a very small minority. But one way or another, you need to plan for a change of ownership to ensure both you and the new owner(s) get the best out of it.

A succession plan maps out the process by which a stakeholder will exit the business. Bear in mind that it is not the same as a management succession plan although, in reality, both events may occur simultaneously.

Putting a formal succession plan in place will:

  • Ensure the business survives changes in ownership and continues as a successful entity
  • Identify and address family / partner issues before they become disagreements
  • Minimise tax liabilities and maximise return
  • Ensure an orderly transfer of control and competencies

Prepare the business and future leadership for transition

A succession plan will clarify the owners' expectations of when they foresee exiting the business, identify what needs to happen to prepare the business for the transition, review all of the available options and make a recommendation as to the preferred option, along with a plan for its implementation.

Step 1 - Identify the requirements of the owners and their preferred exit date

Determine preferences concerning:

  • When they want to exit the business
  • What they need out of the business - income, retirement provision, etc.
  • Continuation of the business - are they grooming anyone to take over, i.e. what is the management succession plan?
  • Structure of the business - would they be prepared to consider breaking up the business if that was more attractive to a potential buyer?
  • Any other relevant personal goals, e.g. a desire to start a new business that exploits a personal name associated with the old could have major issues for the continuing business

Step 2 - Evaluate the business's readiness for succession

Assess the current position of the business (competitive, financial, cultural and structural). Develop a specific succession action plan to prepare the business for transition.

Step 3 - Review the options in relation to the personal needs

There is a wide range of succession / transition options - from gifting the business to an outright sale. Gather information on available finance for the various options. Determine the business' core competencies and gather information on alternatives for transferring and maintaining those competencies to the new owners.

In particular, consider a progressive sell-down or, at least, progressive payment. Finding all the funding up front is likely to be extremely difficult for the purchasers, particularly if there is no new capital coming in because the sale is to the other existing shareholders.

Also, think through the implications for the business of your departure and how this will be dealt with in relation to customers and other key stakeholders. Discuss and agree on whether there will be an ongoing non-executive role, at least for a handover period, to ensure the value of the business is maintained for the new owners.

Step 4 - Determine the best option

Agree on the criteria to be used in evaluating each option. These could include the following:

  • The desire of exiting owners to maximize price
  • Timing of exiting owners' need for cash
  • Taxation
  • Business disruption
  • Management continuity
  • Transaction costs

As a result of your evaluation decide on the preferred option.

The plan

A written succession plan that covers the areas of:

  • Objectives of all major parties
  • Options considered with their pros and cons
  • Selected options and details of implementation including; price (which might be a formula of profits, say), timing of departure, timing of payments, management transition, communication plan for customers and other key stakeholders, ongoing role (if any) of exiting owner, major tax considerations, responsibility for execution of plan


Involve all of the owners. Often they will never have spoken about their personal goals for getting out of their business. Resolve conflicts before you do anything else.

Be prepared for emotional issues to emerge. People can become very attached to their business so need to manage that accordingly.

Investigate a range of options. Often owners will rarely have thought deeply about this subject and a business sales advisor can bring a lot of value to the table.

Going through the same sort of process with the managers in a business - succession planning does not just apply at the owners' level.


Think that you have to do it all. There are a host of differing professional skills required to successfully transition a business from one owner to another. They include tax advisors, financial planners, lawyers, trust advisors and insurance agents.

 Assume that because the next generation is working in the business today, that they are automatically the owners and / or managers of the business in the future. They may have drifted into the business but you have little confidence in their ability. Be sure to get all of the issues on the table.