Succession Planning vs. Exit Planning: Which Do You Use?
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April 11 2022 - Itís a feeling that is near-indescribable to anyone who hasnít been in your shoes - the feeling of having invested countless hours and unquantifiable levels of energy into establishing and growing your business and, finally, feeling ready to move on and enjoy life on the other side of ownership.
Whether youíre ready to retire, or simply to move onto something new, it can be very difficult - if not impossible - to imagine how it can keep going without you at the helm.
This is why you need a strategy in place, to ensure that your business doesnít collapse in on itself once youíre no longer holding it up.
Succession planning and exit planning are sometimes seen as one and the same, but thereís a big difference between them - and various reasons why a business owner will find one or the other a better option.
What is exit planning?
An exit plan is there to ensure that, as the business transfers ownership to another person or entity, all factors relevant to this transfer (and, as a result, to the current ownerís departure) are identified and planned for in advance.
In the future, as you exit your business, there will be many different paths for you to follow. This is why exit plans include a wide range of factors, including sale to a third party, an EOT (Employee Ownership Trust), sale or transfer to family members, as well as liquidation. You can, however, find a much more comprehensive guide to planning for your businessí future here: willans.co.uk/service/corporate/.
Exit plans ensure that, when ownership changes hands, the processes have been planned for in advance, and that the entire business is prepared against disruptive upheaval. It frees up your hands, prevents your employees from the stress of major change, and prevents unwanted hiccups from complicated an already complex time.
What is succession planning?
Succession planning shares some similarities with exit planning, but the key difference is the fact that succession plans are intended to ease a business through the process of transferring leadership/management from one generation to the next within the business.
They are, for that reason, an excellent tool for retaining key talent within the business; employees that feel strong and committed enough to one day run the business when you are no longer there. It creates a strong sense of direction for their careers, as well as safeguarding the business against turmoil in the event that you are taken ill, or incapable of overseeing the business as you do now.
The key similarity between both types of plan is, of course, the fact that they are complicated, and not something you will want to attempt to write on your own. Experienced corporate solicitors who have seen many other businesses through this process will prove invaluable to you as you work out which path is the right one for your business, and how you can create a strong, solid, actionable plan for the businessí future.