Planning for the future: succession and exit strategies for Yorkshire business leaders

By Natalie Wright, Private Client Partner, UK Head of Family Business and Leeds Office Managing Partner at Forvis Mazars

In the dynamic world of business, the question of “what’s next?” is ever-present. For business leaders, this question is particularly crucial when considering the future management and ownership of their business. An effective succession and exit plan is essential for a smooth transition, maintaining business continuity, and achieving personal and financial goals, but it’s not always easy to implement. Many business leaders aren’t sure where to start or are unaware of the true extent of their options.

Understanding succession and exit planning

Succession planning involves identifying and developing new leaders to replace current ones when they leave, retire, or pass away. While some events can be planned for, others are beyond your control. A succession plan not only protects the long-term continuity of the business but also acts as an insurance policy if things don’t go as planned.

Exit planning, on the other hand, prepares for the eventual transfer or sale of the business, aligning the owner’s personal and financial goals with the business’s future. We often find that when business leaders turn their thoughts to their ultimate exit from the business, this is the point they start considering their actual succession. But is this too late?

Key steps in succession planning

• Start early and plan continuously: Begin the succession planning process well before it’s needed. Regularly review and update your plan to reflect changes in strategy, market conditions, and personnel. No business stands still and neither should your planning. 
• Identify key positions and skills: Clearly define which roles are critical to your business’s success and identify the skills and competencies required for these positions. 
• Assess current talent: Evaluate current employees to identify those with the potential for key roles. Consider their performance, potential, and aspirations. If you don’t currently have the skills in-house, do you have individuals who could develop and acquire them? What steps are needed to prepare them? If the right individuals aren’t in place, recruiting now might be essential to your planning.
• Develop a formal plan: Create a structured and documented succession plan that outlines how potential successors are identified, developed, and prepared for future roles. If it’s not written down it often doesn’t happen, but you need to get the balance right so you don’t over-engineer something which could lead to inaction. 
• Invest in professional development: Provide targeted development opportunities, including training, workshops, and further education, to prepare identified successors for their future roles.
• Implement mentoring and coaching programs: Facilitate knowledge transfer and leadership development by pairing high-potential individuals with experienced leaders.

Key steps in exit planning

• Establish your personal objectives: Identify your reasons for exiting the business and your desired outcomes. Consider your personal, financial, and professional goals in that order. As a business leader, your day-to-day focus is on the business, but ensuring you give your personal life the same amount of attention when it comes to ‘what’s next?’ will be key to ensuring your exit is successful. 
• Determine the value of your business: Alongside professional advisors, establish your business’s current and potential value, taking into account where you are now and where you want to be in the future. What risk factors could impact this in both the short and long term? 
• Choose your exit strategy: Explore different exit strategies such as selling to a third party, family succession, management buyout, private investment, or employee ownership. Select the one that best suits your objectives and situation. Some of these options will allow you to leave on day one, some will require you to remain involved potentially over a number of years. After years of being the owner and decision-maker, how would you feel about having to report into someone?
• Develop your exit plan: Create a comprehensive and personalised exit plan that outlines the specific actions needed to execute your chosen strategy. Include a timeline and budget for implementation and ensure you know your ‘number’ i.e. how much do you need to fulfil all of your personal objectives.
• Execute your exit plan: Implement your exit plan with the help of your professional advisers to ensure you navigate challenges and make the most of opportunities. Monitor and adjust the plan as needed to respond to changing circumstances and needs.

Personal considerations

Planning for the future isn’t just about the business; it’s also about your personal journey. Here are some personal considerations to keep in mind as you embark on this process:

• Emotional readiness: Transitioning out of a business you’ve built can be emotionally challenging. Prepare yourself for this change by envisioning your life post-exit and setting new personal goals.
• Financial security: Ensure your exit plan secures your financial future. This might involve diversifying your investments, planning for retirement and tax structuring.
• Legacy and impact: Think about the legacy you want to leave behind. This could involve ensuring the business continues to thrive under new leadership or making a positive impact on your community. It also involves thinking about the legacy you want to leave with your family. 

What’s next?

Effective succession and exit planning are vital for the longevity and success of your business. By starting early, involving key stakeholders, and considering both business and personal factors, you can ensure a smooth transition and secure a bright future for yourself, your family and your business. Find out more.