As Stephen Covey said in his book The 7 habits of highly effective people, we should always “begin with the end in mind”
If we don’t, we are simply sailing in the wind without a map!
This concept is critically important when succession planning or deciding on your exit strategy. We cannot therefore stress enough the importance of having a plan in place. This then acts as a roadmap to achieving the best possible outcome.
We would suggest the following elements go into a succession plan:
1. The Purpose of the Succession Plan
Who is exiting the business and when?
2. What you want to achieve
What are the personal and financial goals you’d like realised as a result of the exit?
3. Timeframes for succession
This is a crucial aspect of your succession as the time you have will directly impact on what can be achieved.
4. Succession options
What options are available to you?
-Succession from within the business
-A trade sale
-Private equity involvement
-A structured liquidation
The plan should set out the preferred option.
5. Business value
What is the business worth now, what could it potentially be worth in the future and how can you maximise its value?
6. Opportunities and vulnerabilities
Identify factors that may influence the Succession Plan, e.g. changing marketplace trends may affect the timeline or how you groom the business for sale.
7. Most critical challenges
Identify these and plan how to best manage them.
8. Goals / key projects
Set 12-month, 3 year and 5 year goals and outline key projects that need to be undertaken.
With a plan in place, you can move each year towards the end goal. Its much better to be sold than to be bought, so you need to own the process and be prepared for it. But fundamentally you need to build a business that is valuable and saleable if you are going to achieve the optimum exit. Price. You wouldn’t sell a house or other asset that was in poor condition or needed work doing to it to maximise its value.
Succession planning is a great opportunity to take care of the things that need to be done to enhance the business value, including:
- Getting the finance function in order so that you get into the habit of knowing the key numbers on a timely basis.
- Modernising outdated systems and processes
- Structure the business so it doesn’t rely on you – build a great team around you
- Systemise and automate whatever you can
Hopefully the above has given you some food for thought – if you want any assistance in getting a succession plan in place, contact Paul on Paul.dell@raffingers.co.uk or alternatively call 0208 551 7200