Successfully transferring your company: the decal of actions to be taken!

1. Define an Ownership Strategy

Entrepreneurs and their families do not always have a very clear picture of their future paths. The lack of an ownership strategy, or lack of clarity, can easily hinder the smooth course of business succession.

In this perspective, it is fundamental to be open to the subject and to determine, ideally several years in advance, which succession solutions the entrepreneur will turn to and with what time horizon. The first step is therefore to analyze the ownership relationships. Purpose: to prepare the company as well as possible, to disconnect from certain activities or assets if necessary, but also to facilitate the task of potential buyers.

2. Develop plans in advance

Usually it is emotional obstacles rather than factual reasons that prevent entrepreneurs from preparing and implementing succession solutions. The same reasons force them to join this process far too late.

This psychological barrier often results in ignoring or denying the problems. A start of the solution – which can also be foreseen – consists in setting up management structures that depend not only on the owner, in speaking candidly with their loved ones, but also in seeking external advice.

3. Identify strategic opportunities

In the absence of better alternatives, some SME owners opt for unrealistic solutions or make flawed agreements. If those solutions subsequently fail, or the unexpected happens, it’s often because better options were overlooked or identified too late. It is therefore essential to identify the different types of potential buyers, as the follow-up process will vary depending on the option chosen. If they are his children, do they have the experience and knowledge to take over the company? How are they going to fund the broadcast? Is the parent willing to support them financially? And how to be fair to the rest of the family if within a sibling only one child resumes the activity?

A transfer through a third-party buyer also involves choices between different scenarios. For example, a takeover by a competitor may involve organizational changes or even the disappearance of the brand. It can be a source of constipation. In the event of a recovery, is the company prepared and strong enough to meet future challenges without being part of a larger group? All these questions and considerations must be considered in order to choose the best strategy and define a clear timetable for both the seller and the buyer.

4. Take advice

Estate planning solutions are usually very complex. Hence the importance of choosing qualified advisors in the particular field. Failure to do so puts the succession at risk of being mismanaged and the company’s image in the market suffer significantly.

In addition to the legal and tax aspects, routine business succession advisors will be able to highlight the various internal or external solutions, formulate a strategy in line with shareholder expectations and thus anticipate the potential financial needs of buyers. Every business succession is unique, so there is never a ready-made solution!

5. Assess the value of your business

The personal or financial interests of a business owner or their family members can jeopardize the adoption of the best succession solution. Especially when a recovery outside the family is rejected for emotional reasons, or when an unrealistic price is claimed.

An outside estimate of the company’s value can reduce the emotional element and make decision-making more factual. Such a valuation also allows one to think about the market situation, about the assets that may or may not be needed for the operation and about the right timing.

6. Organize the company to prepare the succession

A company that is not well prepared for a succession will not be able to implement the chosen solution properly. Ultimately, the SME boss and his family run the risk of being disappointed, both emotionally and financially.

To make it as interesting as possible for the identified buyer, the company must be well organized and structured. In addition to strategic aspects, IT systems, management principles and management methods will be important aspects to achieve a successful transaction. It is sometimes relevant to think about decommissioning properties, often undervalued by a buyer.

7. Run an organized and structured process

Entrepreneurs often consult with a single buyer they already know. Negotiations with only one partner often create situations where the conversations stall. Consequences: the price is rarely optimal and emotions can take over.

Such a situation can be detrimental to the success of the transmission and thus block the file for several years. The implementation of a structured and guided sales process makes it possible to receive multiple offers, compare the different types of buyers and avoid too close and emotional involvement of the sellers. The involvement of a consultant also makes it possible to have an external view of the process and to set the right priorities for the decisions to be made.

8. Communicate clearly about the estate

The timing of the announcement is critical for everyone in the company, including employees, customers and suppliers. Failure to carefully plan when the different actors are involved in the process can have negative consequences for the company.

At this point it is essential to show the gratifying perspectives that this transmission can bring to the various stakeholders. For example, a takeover by a larger group opens up better career opportunities for employees.

9. Support the buyer and develop future prospects

It is not always easy for an entrepreneur to outsource. The successful buyer may therefore find it difficult to take control and assert himself in society. The support of the seller is therefore essential, whether the buyer is a foreign individual or a group.

However, it is important to keep in mind that the salesperson is shifting from the role of decision maker to that of coach and advisor. This transition period can be more or less long depending on the type of transaction and must be anticipated to ensure the success of the operation.

10. Don’t forget – the last tip

A grateful and successful life as an entrepreneur does not prepare for a successful succession! For many, this is a new and unknown universe. Upstream reflection, careful preparation and execution of a well-planned process are essential and decisive elements for a good transfer. A good listener!

To find out where you are in your business succession, UBS offers a SME succession check, which you can find here.

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