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Building a successful and thriving business takes a lot of time and a great deal of effort, particularly in the early years. But among all the growth strategies, marketing plans and brand awareness, there is one important piece of the business jigsaw that is often overlooked – a succession plan.

While a business owner may have been the driving force behind their company’s achievements, nothing lasts forever. The secret to ensuring your business will continue to be a success after your retirement or death, lies with a well thought out succession plan.

There is no ‘one size fits all’ solution when it comes to succession planning, as every business’s circumstances are different to another. Unfortunately, this often means that no formal plan is put in place and when the time comes for the business to be handed over, complicated situations can arise.

Start early for sustainable success

The key to a successful transfer of a business, or wealth, is to start early and not delay the planning until the point where an exit strategy has to be implemented. Waiting until the last minute could result in rushed decisions and have a fundamental impact on the future of the business.

In its Wealth Transfer Report 2017, RBC Wealth Management surveyed 3,105 high net worth individuals in Canada, the U.S. and the UK, asking about financial education and inheritance. The report found that in all three countries, this crucial financial education for the next generation was delayed until they had reached their late 20’s.

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The reasons for this delay were numerous, from the respondents not feeling prepared enough to discuss their finances or not being comfortable talking about their own death, to them not believing their inheritors were old enough or ready to learn.

The report rightly states, “Whatever the rationale, the late age at which heirs start learning about financial literacy undoubtedly impacts their ability to manage and preserve a lasting legacy.”

Why have an exit strategy

The benefit of constructing a succession plan in place long before it is needed is that you have time to work with who will eventually take over the helm of the company. It provides an opportunity to pass on years of knowledge and instill a similar ethos and vision for the long-term future of the business.

Getting things in order in those early years also helps family-run businesses understand the plans and aspirations the younger generations have. It may come to light, for example, that a child has little interest in taking on the day-to-day running of a family business, a fact the parents may not have been aware of before they started discussing the needs of the business following their retirement or death.

If you are planning to pass on your shares to your children, it is important to seek advice from a tax specialist, says Katherine Waller, a relationship manager at RBC Wealth Management in London.

“The current business owners need to be aware that if they are going to be exiting any shareholding, at any point of time, there will be a tax charge associated with doing so,” Waller says.

It’s not personal

For any business owner that has created a successful company over time, having an emotional interest in its continued success is natural and to be expected.

In order to put a competent succession plan in place, some potentially difficult questions need to be addressed. “There’s an emotional value to owning and then gifting away a business,” Waller says. “There may also be corporate governance issues that need to be considered, particularly in a family business environment. As the owner you need to consider what your exit will look like, how that leaves the business and also the emotional drain that it could have on the business.”

She adds, “For example, you might lose employees because they believed in the previous management team, and that’s a silent tax. You’re losing part of the value of the business, by virtue of an emotional tie to the management currently in place.”

One way to strip the emotion out of a succession plan is to consider setting up a trust, which is a legal relationship in which the trustees manage and administer the transfer of assets from one person or company to another.

As with any business strategy or plan, it is important not to simply draft it and then forget about it. Succession plans, once put together in the early stages of a business’s life, should be regularly revisited to ensure that whoever takes over will continue to build on the success achieved so far.