An article by Paul Green, Managing Director of the Galpeg Network
As a business owner you have probably spent countless hours writing business plans over the years to help keep your business thriving. As a result, you may have a well-developed business plan in place but have you gone far enough in considering what happens to your business after you retire or if the unexpected should happen?
Few consider succession planning earlier than they need to, whether that be selling the business to a competitor, passing it on to a family member(s) or to one or two key employees or even creating an employee share ownership scheme, depending on the size of the company.
Whatever the future holds, it’s important to have a clear plan in place so you know your business is in good hands when the time comes.
We know it can be hard to imagine someone else running your business after you’ve nurtured it and watched it grow, but creating a succession plan helps you look after its future.
Some of the benefits of succession planning include:
- putting the right people in charge
- looking forward to retirement
- preparing for the unexpected
- peace of mind that your business will continue
The promotional merchandise sector has its fair share of businesses that have been around for 20, 30 or even 50 years or more – businesses that have been built on long-term customer and supplier relationships with a culture and identity that reinforces why they have been around for so long.
Employees who have helped the owner(s) make the business a success story are stakeholders with a vested interest in the future wellbeing having possibly committed a great deal of their own emotional capital to the cause. Few owners may seriously consider having meaningful internal discussions about their plans, even though they are the very ones who really know how the business ticks.
The normal scenario is to offer to seek an external buyer, someone with the financial means to do a deal. Understandably, such potential buyers may not have the same motivations as those of employees; chief amongst them being to bolt on extra sales to their current business with a view to an eventual sale with the benefit of a combined turnover.
So why should an owner start the succession planning process by first considering selling to one or more employees?
The key motivation would be to leave a legacy, to allow the business to continue to flourish, maintain its identity, its culture and continued employment for existing staff. If this can be maintained and agreeable sales terms negotiated, then surely this must be the best outcome for all concerned?
Such a transition would allow the existing owner(s) to scale back on their day-to-day commitments during the buyout period, thus allowing the owner(s) to make the transition to retirement less of a cliff edge experience. Fortunately, today there are various avenues available to employees to meet the financial requirements of buying the business and owners should at least give them the opportunity to do so.
Paul Green is Managing Director of the Galpeg Network which provides administrative and financial back office support to smaller distributors within the promotional merchandise industry.
Published on: May 11th, 2023
