I seem to be finding myself having more and more conversations with business owners and the people who advise them on their exit plans.
These conversations always used to focus on the value of the business and how much or how soon that value could be realised by selling.
But now the focus is on the role of the current owner, and on the future success and sustainability of the business after the owner takes a back seat.
With the UK’s first Employee Ownership Day on 4 July 2013 and the ‘John Lewis’ effect being a common theme in the news these days, employee ownership or management buy out (MBO)-type arrangements are becoming the preferred exit route for today’s enlightened business owners.
But why are business owners choosing this sort of succession planning over a traditional trade sale?
From discussions with dozens of clients, here are the reasons, in roughly ascending order of importance:
- Avoiding the upfront costs of appointing a business sale agent/broker
- Avoiding the due diligence that goes with a trade sale
- Preserving the company name/brand
- Avoiding the low investment returns on the sale proceeds
- Keeping a share of the future success and profits, depending on how the planning is done
- Getting paid the full value of the business, albeit over a long period
- Avoiding the risk of business failure after the sale, making long-standing loyal employees redundant
- Rewarding long-standing, loyal employees with a stake in the business
- Keeping an interest in the business, but just doing the work you enjoy
- Finally, doing more of what you love with your extra free time
Our succession planning work, using the ISOP system, is designed to achieve all of these things and at the same time ensuring that the tax benefits that you get from selling the business also apply with an employee ownership succession plan.
What are your succession plans and, if you haven’t considered employee ownership, perhaps you should?