Succession planning and business transfer

Disposal (selling the business) is normally the best option if there is a need to raise cash (perhaps to fund retirement), an absence of successor or the family has no desire to continue its involvement in the business.

Deciding to sell can be tough for owner-managers who can feel reluctant to let go of a business they have nurtured for years. Careful preparation will help to lessen any anxieties, until you are sure you have found the right buyer.

Preparing for sale of your business

It can take several years to get to the stage where a business is ready for sale. If you decide disposal is the most appropriate option, then you need to establish a plan and some objectives for preparing the business for sale.

To ensure your business is in the best shape to command a competitive offer, you should consider seeking guidance from an experienced corporate finance adviser.

Before being in a position to sell, you need to make sure your business is as lean, efficient and profitable as possible. Clear evidence of sales growth via creditable projections will maximise its appeal. There should be no major issues that could jeopardise the sale, such as legal action or a tax investigation.

The key options

Management buy-outs have become increasingly popular with family businesses. Transferring control of the business to an incumbent management team that already has knowledge of the company provides numerous advantages. It also gives the owner-manager the chance to transfer ownership to people who are already committed, possess knowledge and relevant experience and who already have a stake in the business' continued success.

Management buy-ins occur when a new management team joins the business and takes a stake in its equity.