Business Succession Conversations

For years, succession planning in small businesses has been on the to-do list.

As a business owner, you know that list – I do too.

But lately, the list is changing, as more and more owners are actively stepping up succession planning and coming out with us, no longer content to leave the future of their business to fate.

Many seem to have immediate plans to pass on the reins to the next generation, and not just because they like spending more time on the golf course.

Tax changes, as well as a desire to remain in control of the narrative, are pushing succession conversations from “later” to “now.”

It’s rare to run a family business only about profit margins and spreadsheets.

That’s identity.

Inheritance.

Companies that start from a spare room or warehouse.

Kids growing up stacking shelves or answering the phone.

The pride of seeing the company name on the side of a van or in a publication.

That is why many people are reluctant to think about a solution. It’s emotional. And it can feel complicated.

But with recent tax changes – a reduction in business asset disposal relief (BADR), changes to CGT relief on sales to an EOT, and proposed inheritance tax reform (although most trading businesses remain unaffected for now), owners are starting to question themselves.

If not now, when? And if not now, what does my way out look like?

I see this every day – not just with clients. Fellow business owners who were previously satisfied with what they were doing are now wondering what to do next.

Should we wait, or act now while the tax code still provides benefits, and we still have control over the process? After all, none of us knows what the future will bring.

But it’s not just taxes.

Post-Covid, many business owners are realizing that they don’t need, or want, to work 14 hours a day without being tied to a desk. They can stay involved while spending the winter in Portugal. They can still be part of the business, just different.

I see more people in their 40s and 50s thinking about succession, whereas previously those conversations only started in their 60s or 70s.

The owner is exploring things like

• bringing children into leadership from an early age,
• transfer shares in stages,
• establishing a Family Investment Company, or
• formalizing plans to pass on the business to the existing management team where family succession is not an option.

The conversations we all avoid

And let’s be honest – these conversations can feel awkward.

We recently met the owner of a large portfolio and his wife, both in their early 60s, and still working 60 hours a week on the business they spent 20 years building.

They assumed one of their four people would take over, but they all have full-time careers. The first question is simple – do any of them really want this?

We also met with a client who ran a family bakery. His son, now Finance Director, wanted to take action while his father was away; but he knew he needed help. They have a great Director of Operations, so we discussed what shared leadership would look like in the future.

But these things require planning. As business owners, we can’t just live in hope (or denial).

The hope that one day someone will step forward and say “don’t worry, I’ve got this” or a buyer will magically appear.

Maybe there needs to be restructuring.

Business needs to be respected.

And most importantly, conversations need to be had – perhaps a lot – this takes time.

Talking about setbacks is never easy, especially if business is tied to personal identity. No one likes to admit that they won’t always “run the show.” But without proper planning, uncertainty can turn into disputes, disputes, and unavoidable tax bills.

Succession doesn’t have to mean walking away

Accelerating succession talks does not mean walking away. In many cases, founders stay involved in different ways.

Succession conversations allow business owners to protect their business while giving the next generation time to grow, make decisions, and make mistakes in a safe environment.

And there are commercial benefits too. Businesses with a clear future leadership structure look stronger in the eyes of lenders, investors, suppliers and clients.

So, when is the right time to start planning?

What do they say? Oh yes! There’s no time like the present.

Succession should not be something that just happens to you. With the right advice, it’s something you design yourself.

And now, more than ever, owner-directors are increasingly aware that waiting for the “right time” can mean missing out on opportunities to tax wealth efficiently and on their own terms.

So, if you’re thinking about what your next chapter will look like – whether it’s five or fifteen years away – it’s worth starting the conversation. Even though it feels a little uncomfortable.

So, if the future is on your to-do list, give us a call – you’ll probably feel better afterward 😊.