The succession of a company is a lengthy process with many obstacles. Tips to successfully settle your succession.
Practical experience always highlights the essential points which must be taken into account when settling succession of a company.
- Anticipate the settlement. Entrepreneurs unfortunately tend to address succession too late, resulting in a hurried sale (compulsory sale) or unwanted liquidation of the company. Ideally, the process should be started about 10 years before the transfer.
- Establish a detailed timetable and strategy. When the entrepreneur and their family do not have a clear vision of what will become of their role within the company, the succession process is hindered and confusion reigns. The transfer should be seen as a gradual process aiming at a smooth transition.
- Remain flexible. Some owners decide on their succession on their own, without consulting the other interested parties. Another scenario: when the entrepreneurs have difficulty giving up their company and continue to interfere in the business, which causes serious harm to their successors. The aim is to allow the buyer to gradually assume their responsibilities while establishing clear structures and processes to facilitate their integration.
- Set a realistic price. Wanting to get as much profit as possible out of the succession, the entrepreneur sometimes refuses realistic compromises regarding the price of the handover. The sale is delayed or becomes impossible. It is essential to conduct a thorough review of the company’s value in order to set a realistic price, taking into account financial key figures, strategic factors and market potential.
- Consider the assets required for operation. Companies often have very large assets, most of which might not be necessary to its operation and which decrease the company’s profitability. This “encumbers” the company and also complicates the situation from a tax point of view. This type of company is hard to sell. Working with tax experts at an early stage helps to identify and minimise potential tax burdens.
- Show flexibility in the succession process. The entrepreneur should not charge head first into a succession solution which proves unsuitable or unrealistic. As no replacement plan has been considered, getting back on track becomes very difficult. For example, it is recommended to be flexible regarding funding and to consider alternative transfer options in the event that initial plans cannot be optimally implemented.
- Choosing the "right" successor. This is without doubt the most difficult task. It is therefore worthwhile taking the time to draw up a good skills profile, conducting extensive research, conducting several in-depth interviews, preferably in the presence of a competent third party, and proceeding with the necessary clarifications.
- Consult specialists quickly. The succession is carried out without the assistance of independent experts such as lawyers, tax specialists or company advisers, or their services are underutilised. Entrepreneurs should consult experts quickly to make informed decisions.
- Inform in a transparent manner. The succession is sometimes not the subject of open, frank communication. Employees and customers, taken by surprise and presented with a fait accompli, lose confidence in the company. The owner should provide channels of communication to address questions and concerns from staff, customers and distribution.
Sources: UBS Outlook, Generali
