Why business succession conversations are - and should be - starting earlier

For years, succession planning in small businesses has sat on the “must get round to” to-do list.

As business owners, you’ll know that list - I have one too.

But lately, it’s moved lists, as more and more owners are actively raising succession and exit planning with us, no longer content to leave the future of their business to fate.

Many seem to be fast-forwarding plans to pass on the reins to the next generation, and not just because they fancy spending more time on the golf course.

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

Running a family business is rarely just about profit margins and spreadsheets.

It’s identity.

Legacy.

That firm that started in a spare room or a shed.

The children who grew up stacking shelves or answering phones.

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

Which is precisely why many people avoid thinking about their exit. It’s emotional. And it can feel complicated.

But with recent tax changes - reductions to business asset disposal relief (BADR), changes to CGT relief on sales to an EOT, and proposed inheritance tax reforms (even if many trading businesses remain largely unaffected for  now), owners are starting to ask questions of themselves.

If not now, when?  And if not now what might my exit look like?

I see this daily – not just with clients. Fellow business owners who were previously content doing what they were doing, are now asking what’s next.

Should we wait, or act now while the tax rules still bring known benefit, and we still have control over the process? After all, none of us know what the future holds.

But it’s not just a tax.

Post-Covid many business owners have realised they don’t have to, or want to, work 14 hour days tied to a desk. They can stay involved while spending winters in Portugal. They can still be part of the business, just differently.

I’m seeing more people in their 40s and 50s thinking about succession where previously those conversations didn’t start until their 60s or 70s.

Owners are exploring things like

• bringing children into leadership earlier,
• transferring shares gradually,
• setting up Family Investment Companies, or
• formalising plans to pass the business to the existing management team where family succession isn’t an option.

The conversations we all avoid

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

We recently met with a large portfolio landlord and his wife, both in their early 60s, and still working 60 hours a week in a business they built over 20 years.

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

We also met a client who ran a family bakery. His son, now Finance Director is keen to step up when his father steps away; but he knows he needs help. They have a great Operations Director in place, so we discussed what a future shared leadership might look like.

But these things need 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 that a buyer will magically appear.

There may need to be a restructure.

The business will need valuing.

And most importantly conversations need to happen – maybe lots of them – these things take time.

Talking about stepping back is never easy, especially when the business is tied up with personal identity. No one likes admitting they won’t always be “running the show”. But without proper planning, uncertainty can turn into fall-outs, disputes and avoidable tax bills.

Succession doesn’t have to mean walking away

Accelerating succession conversations isn’t about walking away. In many cases, founders are staying involved just in a different way.

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

And there are commercial advantages too. Businesses with a visible future leadership structure appear stronger to lenders, investors, suppliers and clients alike.

So, when is the perfect time to start planning?

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

Succession shouldn’t 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 “perfect time” can mean missing an opportunity to pass on wealth tax efficiently and on their own terms.

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

So, if the future is sitting on your to-do list, get in touch – you might just feel better afterwards 😊.