26 business focus Planning an exit strategy


An exit strategy should be an integral part of any business plan for two key reasons, writes Jo Davis, employment law partner, employment team, B P Collins LLP


Firstly, a business owner who decides to announce an impending retirement doesn’t want to face the prospect of no successor. And secondly, a sudden deterioration in the owner’s health may make it essential for responsibilities to be abruptly transferred to someone else. If there is a plan already in place to mitigate the effects of such changes, they may not be as disruptive to the business.


Create an exit strategy from the outset


There are a host of exit options available but if the preferred choice is retirement with a well- managed succession, then several questions could arise such as:


1 if there is still a role for the owner in the company’s future operations,


2 the impact of a senior management change on the business’ structure,


3 how the departure will affect employees, suppliers and customers and,


4 if the business will change location or even its name.


All of these questions should be considered, so that any risks and fears can be, where appropriate, mitigated.


Choose your successor


It is tempting to maintain secrecy when deciding who the chosen successor will be for fear of


offending, but support and buy-in is needed from those affected by the outcome. Observe potential successors and evaluate if they could be the next leader. Interviewing all candidates is important as it will help to ascertain those that are (and those that are not) willing to run the business in the future.


Retain good managers


It is imperative to retain key staff as they will contribute to the business' success and take it forward when the owner wants to take a step back – or out. By incorporating financial incentives such as employee share schemes into the plan, you can encourage key managers to


KPMG study suggests mid-sized companies risk losing talent


New research from KPMG suggests that despite the high cost of replacing talented staff, the majority of mid-sized companies in the country still have an erratic approach to keeping their people happy.


In a study of 223 leaders of mid-sized companies (with a turnover of between £10 million to £500m), only 29% of businesses described their approach to talent retention as “formalised”. 44% said their approach was “thorough but unplanned, with lots of initiatives which were not integrated into an overall strategy”. A further 27% admitted their approach was nothing more than ad-hoc.


In attempting to monitor and retain staff, nearly eight out of 10 companies said they carried out annual career- development reviews with staff, and seven out of 10 said they actively


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encouraged open and honest communication between line managers and employees. Far fewer, however, used more in-depth techniques.


For example, only 49% actively trained managers to manage their staff effectively and only 46% offered non- financial incentives to staff. In addition, only 30% attempted to capture and analyse key performance indicators of talent.


Andrew Morgan, senior partner for KPMG’s Thames Valley office, said: “Despite the fact that many of our clients frequently complain that they are engaged in a ‘war for talent’, these results show that mid-sized companies are a lot less systematic than larger businesses in their approach to talent retention.


“While that is not surprising in itself, given the perceived cost of implementing


stay and grow the business, with the promise of a share in its success.


Train and develop your successor and senior team


Alongside retaining key staff, it is important to build up the next leader and senior team so that the owner’s departure (planned or otherwise) doesn’t have a negative effect on the company. Knowing the team can handle the business in the event of an illness or other absence is reassuring. However, owners should also ensure they protect their business by implementing suitable restrictions on those managers, so that they cannot poach customers and staff if they become impatient to assume control.


Manage the risk


Finally, it is essential to plan for the possibility that the business owner could pass away or become incapacitated before implementing the devised exit strategy. Business owners should ensure that they have a power of attorney and made a will, which identifies what should happen to the business and their shareholding in these circumstances. They must also ensure that someone knows where these documents are located and what insurance they or the company have put in place, to keep the business on track.


Details: Jo Davis 01753-279029 jo.davis@bpcollins.co.uk www.bpcollins.co.uk


more formalised practices, the impact of a talented individual leaving a smaller business is likely to cause much larger ripples throughout the rest of the company. Talented people take time and cost money to replace. So by not adopting more formalised talent management strategies, companies are fighting this war with one hand tied behind their back.”


A relatively inexpensive practice, KPMG would recommend rewarding staff in a recognition scheme beyond the normal bonus.


Another inexpensive practice is to improve the exit interview which can often help to identify problems companies may not be aware of and which need attention. As staff are often less than frank in this situation, a useful way to find out more is to offer leavers anonymity in exit surveys. Even more important is to develop a culture where there is greater focus on honesty and regular feedback and recognition throughout the year.


Details: www.kpmg.com THE BUSINESS MAGAZINE – THAMES VALLEY – MARCH 2016


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