Max Sealy (FCG WhiteAvon)

Continuing our theme of distilling buzzwords in the industry into discernible action, this article focuses on putting succession into operation.  A lot of people are talking about succession in the industry.  As consultants, we are well placed to facilitate this with our family business clients, many of whom we have already worked with for one, two or even more generations.

Succession needs to work for the successor(s) as well as the successes(s) and needs to be a fluid plan that considers changing circumstances such as survival of spouses, marriage, divorce, illnesses, new generations and changing interests in families over time.  For example, early in succession planning, there may be one member of the family interested in taking an active role in the business, but this may change.  The more discussion there is within families, the more other members gain interest in roles within the business.  Therefore, something that starts out in a 10-year plan can change and evolve over that time.

It is important that everyone knows their roles within the business and it is important to define current roles and what part of those roles change over the period of the plan.  For example, who is responsible for financial recording, who is responsible for key enterprises and how decisions are made.  Family meetings are often touted as being a good idea, which indeed they are, but they need to be thought through in terms of frequency, content and who attends.  Increasingly as consultants, we would ‘chair’ family board meetings that have the opportunity to involve all members of the family in their different roles and responsibilities inside and outside the business. 

Succession also needs to consider the financial needs of the family going forward.  This is becoming an increasingly important factor with increased life expectancy.  So, it is not uncommon now to have grandparents in their 80s, sons and daughters in their 50s and 60s and grandchildren in their 20s and 30s all needing an income from the business.  A big question needs to be thought about how that can be accommodated, both now and in the future.  If three generations all need £50,000 out of a business, how can the business sustain £150,000 profit after tax and reinvestment and what does the business need to look like to achieve this.  This then informs the decisions about what assets can be acquired or sold and whether a new enterprise needs to be started maybe leading to diversification.  This then feeds into a long-term business plan which may involve changes, borrowing and a restructuring of the business.  In this way, succession is informing your operation of the business, rather than the other way around.

There are an increasing number of opportunities now for businesses and it is important that these are factored into plans.  Alongside the description of roles, a training programme over time needs to be put together to ensure that sufficient skills and expertise are also in place and highlighting where they can be sourced, whether it is externally or within the family. 

In this way, operation succession becomes an enjoyable and active process, rather than something that is seen in the light of tax reform, death and generally negative thoughts. 

Contact Max at maxsealy@fcgagric.com or your local FCG Office, to discuss how we can help lead the succession planning process rather than legal and tax matters and events dictating the process.