Succession planning for business owners

Accountants can play a pivotal role when business owners decide to sell from ensuring the finances are in shape to essential advisory and strategic support. Glen Foster, director, partner sales at Xero, provides tips and advice

Planning in business doesn’t just help keep you on track – it also helps you be more confident in your decisions. We recently polled 500 SME owners and found that a third of those with a clear succession plan in place felt more confident about the future of their businesses. A further 17% said having a succession plan in place had brought their families closer together.

There is a common misconception that accountants are only there to count the beans and crunch the numbers. But we all know that isn’t true. If you make yourself as useful as possible during the process of succession planning, you can position yourself as a key strategist for your clients.

Here’s how.

Develop an exit strategy

Business owners often underestimate the time and effort it takes to sell a business. As an accountant, your job is partially to make them understand that it can be the work of months and years – and that it needs to be a key focus.

The more delays there are, the more pain clients will suffer: if it becomes especially protracted, it can lead to a more complex exit, a less tidy handover, and, if the market has moved on, a lower price. So, the first step is to devise a workable plan.

Managing the emotional side of things is just as important as keeping a handle on the finances. Selling a business can stir up strong feelings: owners have built their companies up and many view them as their babies.

Add that to the regular stresses of selling an organisation and it is easy for tempers to flare and second thoughts to manifest. Being patient is extremely important – but so is explaining the process in a compassionate, rational and thoughtful way.

Remember that for many business owners, selling a company is a once-in-a-lifetime event. It is not the kind of thing they will be used to, and accordingly, it is the kind of thing that can sparks anxiety. So be their guiding force, educate them on how the process works and create a clear schedule.

Once they know what to expect, figure out who the most likely buyer is. Many businesses are sold to family or employees, and that can require a particular kind of succession plan. For example, if they do not have the money to purchase the company outright, you might need to account for staggered payments and a slower transition than you were expecting.

Get it sale ready

You wouldn’t sell a house with a mould problem or a half-finished paint job, and you shouldn’t sell a business that is not at its best either. Succession planning is a good opportunity to take care of all the little things the owner has been putting off for later – like modernising outdated systems.

To help small businesses understand what needs to be done and at which times, it is useful to set up an advisory board of experts to provide the necessary guidance. 

Start by getting the finances in good shape. An astute buyer will want to see two years of clean financial data at minimum – so if the accounts are in disarray, they will need to be sorted out. Employ digital accounting software to make sure all records are up to date.

Next, think about how you can help raise the value of the business and thus the likelihood of finding a good buyer. What would make you or your client pause if they were looking to purchase a company? Think about it and then look to fix it pre-emptively. It can make a real difference to the sale price.

Systematise and automate whatever you can. If any accounting function is done manually, change it so that it can be done automatically. The new owner will want to get started as quickly as possible – let them and they will be more likely to get off to a good start.

Get it sold

When your client is ready to sell, you will need to be ready too. They will need to work with a number of outside professionals at this stage. That is unless your firm has a specific business brokering focus – so you can benefit by bringing brokers and lawyers into your orbit. This will allow you to offer referrals, which can earn repeat business and impress clients.

Keep talking to your client at this stage. Let them know what they can expect from lawyers, brokers and the due diligence process. Communication is the most important part of succession planning.

With small businesses, and especially family owned businesses, it is vital to have a clear succession plan in place, even if the client is not planning on handing the business over. As an accountant, you can play either a peripheral or an integral part in helping your clients sell successfully. Choose to be as useful as possible and your clients will choose to work with you again.

About the author

Glen Foster is director, partner sales at Xero 

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