Where will your business be in 5 to 10 years, or such other time as you decide to retire?
Ultimately there are two options or alternatives for business owner-managers:
- Termination – the business ceases to exist, or
- Transfer – the business continues but is no longer owned/managed by the current owner-managers.
The transfer of the business includes a number of sub-options as follows:
- transfer to successors;
- to staff;
- to co-owners or partners; or
- to third parties.
This short article focuses on business continuity which is the result of transfer of the business (‘transfer’ here includes ‘succession’) to heirs and successors or to loyal employees.
Transfer to family members or to long serving employees is primarily a process of creating a shared vision for the future of the business and working co-operatively during the transition period to achieve results which meet the legitimate expectations of the parties involved. Simply, it is about creating and implementing a ‘win-win’ strategy based on a genuine partnership between seller and purchaser, current owner(s) and successor(s).
The main proposition put forward here is that forward planning and attending to the details of the transfer process maximise the transferable value of the business and contribute to the owner-manager’s peace of mind.
The precondition for successful transfer is ensuring that there are willing and able successors who end up taking over the business based on an agreed timetable and on mutually acceptable terms and conditions. That too is a process which requires planning and takes time. Willing and able successors are rarely born, they usually have to be developed and nurtured. More often than not, their acquisition of the business may need to be funded in whole or in part with some assistance from the transferor.
The purpose, and the value of business continuity planning is to ensure that the options facing owner-managers and prospective successors are fully understood, and that the critical process of transfer is planned so as to take place as smoothly as possible. By failing to plan the transfer process, owner-managers jeopardise the long term health (or even the existence) of the valuable enterprise they have created through years of hard work, and unnecessarily put themselves in a stressful situation.
The paradox of business continuity and succession is that, critical though the issues may be, there appears to be some inertia in getting the planning process started and seeking outside advice to assist with the planning effort. Many owner-managers end up living with ambiguity and have to ‘wing-it’ with potentially negative consequences for themselves and their businesses. Are you one of them?
What to do next?If the issue of forward planning to make a strategic exit from your business in due course has been at the back of your mind for a while but you have not done anything about it, why not ‘get started’ by attending a specialist workshop on business continuity planning? You could also read relevant books and articles, talk to your professional advisers or discuss the matter with an adviser who specialises in business continuity and succession planning.