It’s all too common for entrepreneurs to be so focused on the day-to-day running of their business that they overlook the practicalities required for growth, writes Sally Ashford, partner, Charles Russell Speechlys.
In the early years of founding the business all the energies of the entrepreneur are rightly focused on getting the business up and running and making it successful. Thoughts of future succession or exits through sale are not high on the agenda. Through Charles Russell Speechlys’ experience of working with successful and often ‘serial’ entrepreneurs, we have found that in order to grow, there must be a professionalising of the business on a number of levels. Fundamentally, this means that the appropriate underlying legal structures must be in good order and properly considered.
The best place to start in terms of succession planning is to create an exit strategy, one that’s based on ensuring your business can run successfully without you. Key questions to ask yourself include:
- Does your business require external funding to help to achieve your vision? External funding can assist not only from a financial perspective but a private investor may bring in expertise as well. For example, angel investors are likely to have substantial business and operational experience which the business can benefit from.
- Do you have the right people to drive the business forward? You may need to take on more staff and you may need to train your additional staff to handle the larger business requirements. These issues can bring their own challenges but having the right people doing the right jobs is essential.
- Have you identified and prepared successors for their roles?
Many of the most successful businesses in the UK are family businesses, with the South East having the highest concentration of family businesses in the country. Unsurprisingly, family businesses have their own specific issues, particularly around succession and the involvement of family members in the business.
As children come along and start to grow up the founder may consider involving one or more of them in the business and family succession may become a realistic possibility. However, there is no inevitability that capable, motivated successors to the business will be found in the next generation. Even when the next generation is well suited to take over, they may wish to choose alternative career paths. It is important for all business owners to consider the introduction of external expertise at all levels of the business and also to consider how to attract, retain and motivate their staff.
To keep innovating and make a success of transition, family business owners must:
1 Make transition more collaborative and open so that the next generation feel they can make a difference and test their ideas. Listen to their passions and identify ways they can express them in the context of the business. See how the business can adapt to encourage their participation – for example, ask them to help you solve a technology-related problem or run a social media campaign.
2 Create a framework to introduce potential next generation leaders to the business and manage the complex legal and emotional issues involved in transition.
3 Be open to external expertise and consider belonging to a business club or network to learn from other’s experience. This can be hugely beneficial.
Charles Russell Speechlys has produced a guide for family business owners called The Connected Generation: Rebooting Family Business Succession for the Digital Age. To request a free copy, contact firstname.lastname@example.org
Sally Ashford is a partner at Charles Russell Speechlys’ Guildford office and provides specialist insight and advice across the full spectrum of business and personal needs. She can offer multi-disciplinary legal support to businesses throughout their lifecycle.
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