I‘ve been in the business 13 years, and although it was always part of our general plan that I would succeed my father, we didn’t formalise the process until last December.
The plan took a while to get right. In reality we decided about three years ago to start the process, but the key thing was getting the right structure in place, waiting for changes in legislation pass and general timing.
I became an equity partner in April 2016. We have now moved to a limited company structure which will ultimately facilitate Brian’s exit.
It wasn’t a conscious decision to wait until now, but it’s worked out really well because it will be our 40th anniversary as a business this May – a fairly significant milestone. Plus we also happening to refreshing our brand at the same time. So it feels like a fresh start.
At one stage we did look at me buying the business, but decided it would be expensive and put a strain on the business, and we wondered would that be the best way to do it? We asked if there a more efficient way. Instead of me putting in an offer to buy the business and have a huge debt both I and the business would have to deal with we looked at this structure. It gives dad an income for the rest of his life, which works really well.
Of course the beauty of owning your own business means you don’t have to have a retirement date so dad will continue for as long as he still enjoys it. He’ll still come in and be a sounding board, and continue to do a couple of days a week.
That’s why it’s key to make sure you put something in place while everything’s going well - rather than waiting until you’re forced into doing it out of necessity.
We’re currently working with a business coach and designing a structure to offer succession to other firms – rather than doing something like selling out to SJP or Succession for example. We’re a very different business – if you look at the average age of business principals vs me for example, there’s quite a gap – so this structure will enable us to offer a smoother, less fraught situation, which is much better for clients.
Keeping it real
You have to be realistic if you’re a firm looking to exit. The general valuation people are expecting for companies is nonsense. Some of the deals going about these business models can’t succeed and it's storing up a problem.
You’re not buying a business really, you’re buying a list of names. But people aren’t thinking of the client when they’re valuing their businesses. It’s not just a transaction - it’s not a big retail company. Clients are ultimately paying for the unrealistic valuations placed on firms in the market.
You need to be able to build valuable equity value in your business. In our sector it’s not part of the conversation – we say "I’ve got trail of £1m so give me £4m," which is utter garbage. You have to be able to generate value from that and you have to be able to prove it.
To learn more about succession planning and exit strategy for your business, download our white paper 'Planning your exit: A guide to creating a succession plan and exit strategy'