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Business


Andrew Christie, Executive Director at Coutts in the North West, offers advice for entrepreneurs looking to put succession plans in place


it on to a worthy management team, and to make sure I see the benefit of my years of hard work. Which factors should I be considering and what plans should I put in place?


Q A


For an entrepreneur, the sale of a business is often a once-in-a-lifetime opportunity


to acquire real wealth after years of hard work. A management buy-out (MBO) is an option


that only a minority of entrepreneurs (19% according to Coutts research) are prepared to consider despite, its potential to be both effective and lucrative. Tere are compelling reasons for selling


your business to an incumbent management team. MBOs may deliver less money up-front, but they offer more long term value. Te entrepreneur has scope to leave money in the business while also preserving their legacy. A capable group of managers will be ideally placed to take the company forward. After all, they know the business, they’ve helped make it what it is and they will be intimately familiar with


I am the owner of a successful business and I want to secure its future by passing


the market and customers. An owner should begin paying attention to succession issues as soon as (or better still, well before) a decision is made to sell the business. For a business to have value, the owner must make a decision to nurture the management talent that will allow the company to trade successfully post-exit, while taking a step back from the day-to-day running of the business. Many entrepreneurs see MBOs as a clean


break; in contrast to a trade sale where the owner is often required to be present during a period of transition. Te MBO typically sees the seller leaving the business on completion. Alternatively, if you’re in a family business,


you may wish to prepare the younger members of the family for being responsible owners and managers, rather than selling the business. It is valuable to spend time with the younger members of the family so they have the opportunity to learn about the business and how to operate as a family partnership. A bespoke programme could be developed, to teach the next generation about the business and what responsibilities ownership and wealth


47


brings. Tis might include having different stakeholders present to them - such as board members, employees, customers and a mix of professional advisers - to help broaden their understanding and awareness. It is a sad reality that just 13% of family businesses make it to the third generation. Succession is one of the biggest challenges faced by any family business and it is important to separate ownership succession from management succession.


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