This may sound an obvious question yet my experience of family businesses is that many business leaders don’t know how to get started with succession planning or they view it as a single event rather than an on-going process. There are three main processes involved in succession planning: Identifying and appointing a successor Managing the exit of the current MD Managing change from both the family and business perspective Identifying and appointing a successor This is the first stumbling block and where the family and business systems can collide. In a family business the hope is that a family member will be sufficiently interested and qualified to take over the reins. Depending on the experience and skills the family successor has, there may be the need for coaching, mentoring and accelerated learning to equip the successor to take over the reins. This may take up to two years as responsibilities are handed over in such a way that business continuity is … [Read more...]
Personal Guarantee Insurance
Are you or your clients worried about the Personal Guarantees that you have given? Then think about PG Insurance. Personal Guarantees are the bane of most business owners’ lives and something that they continually ‘moan’ about. Invariably any form of borrowing above say £5-10,000 from a bank or other financial entity will require further security in the form of a personal guarantee from the business owners and directors. This is on top of any security that they may also take over the assets of your company. As has been seen over the recent past, it doesn’t take a lot for an excellent business to be hit by unforeseen factors that may result in adverse trading and the lender may demand repayment of its money. You may well be faced with a call on the guarantee that you have given. At that point your personal assets are at risk. Personal Guarantee Insurance is there to meet that claim up to the amount for which you are insured. Personal Guarantee Insurance … [Read more...]
Why family businesses might consider putting governance structures in place
The buzzword of recent years is professionalising the management of family businesses. Not only does this mean appointing talent at the top of the organisation be it management or having a NED to advise and seek counsel from, it also means confronting the way families manage the business. Family businesses represent the merging of two systems – those of the business and the family. The drivers of the two systems are different. Business is about taking risks as opportunities present themselves. Families operate differently – often it is about maintaining harmony and so being risk averse. Problems occur when the two systems collide. This is where governance structures come in – to assist families manage the predictable problems. Some predictable problems l have come across are succession, dealing with conflict between family members, dealing with underperformance by a family member, employing family members (or not) in the business. One aspect of a governance structure is the … [Read more...]
Is Now the Time To Sell Your Business?
Have you been thinking about selling your business but just can’t decide if now is the best time? Do you find yourself repeatedly analysing the economic situation and wishing you had a crystal ball? There are positive signs and there are negative signs…. If you’re still up in the air and can’t quite decide whether or not to hit the eject button, here are six reasons you might want to consider getting out now. 1. You’re less interested in fighting the good fight A lot of business owners took the Global Financial Crisis in the teeth. If you’ve got your business stabilised and the prospect of possibly having to fight through another recession leaves you panic-stricken, it could be time for you to get out. 2. The worst is behind you Let’s say you were mentally ready to consider selling a few years ago, and then 2008 hit and 2009 was bad, and in 2010 and 2011 you made cuts and adjustments, and now you’re seeing some profit and revenue growth. With your numbers going in the right … [Read more...]
How to make your company irresistible to potential buyers
One of the biggest factors in determining the value of your company is the extent to which an acquirer can see where sales will come from in the future. If you’re in a business that starts from scratch each month, the value of your company will be lower than if you can demonstrate the source or sources of future revenue. A recurring revenue stream acts like a powerful pair of binoculars enabling you and your potential acquirer to see months or years into the future. Creating an steady income stream is the best way to increase the desirability and value of your company. The more certain your future revenue is, the higher the value the market will place on your business. Here is the hierarchy of recurring revenue presented from least to most valuable in the eyes of an acquirer: No. 6: Consumables (e.g. shampoo, toothpaste) These are disposable items that customers purchase regularly, but they have no particular motivation to repurchase from one seller or to be brand loyal. No. 5: … [Read more...]
What do the new accounting standards mean for you?
In the next year your accountant will start talking to you about the changes in accounting standards in FRS 102. This new standard is about moving the UK Accounting standards closer to the International Accounting Standards. The main difference will be an increase in costs and these will come in two parts. In the year that you convert to the new standards there will be extra costs because your previous year’s accounts will have to be converted to the new standards. There will then be higher costs because there are extra reporting requirements. Here are some of the new requirements: There will be new accruals for items such as Holiday pay. You will have to declare any foreign currency transactions you have set up but not actioned. You will need to make declarations about Fixed Assets, Intangible Assets such as intellectual property and Goodwill. What can you do to minimise these costs. Be prepared. Find out from your accountant which of these changes affect you … [Read more...]
5 things to do to ensure successful transition in the family business
In many recent surveys[1] nearly half of family businesses intend to pass on their business to their children, less than 44% have put a formal succession plan in place. In this blog we summarise the 5 things to do- following up in more depth in successive future blogs. Have family governance structures in place Transitioning management and ownership in a family business is a time of great change creating opportunity and uncertainty in equal measure. Governance structures formalise the way businesses are managed and delineate the separation between family and business. Yet family governance is one of the issues many families seem to be reluctant to address because it forces them to confront major changes in the way they manage the business. Consider a family business that has a family council, which is used to meeting twice a year to discuss how the business is doing from a family perspective. At one such meeting the father announces that he wants to retire in 5 years’ … [Read more...]
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