If you’re on the road to exiting your business, with a plan to fully retire in 2025, now is the time to begin preparing your successor.

This is especially true if you are passing the reins to a member of the younger generation – perhaps your child or grandchild. While you might assume they already know the ropes if they’ve been working within the business for some time, in truth, they may benefit hugely from a comprehensive handover period if your retirement date is approaching.

So, if yours is one of Ireland’s 173,000 family businesses, here are five practical tips for preparing your successor when you’re passing the business to the next generation.

1. Begin preparations as early as possible

In order to ensure a smooth transition, both into retirement for you and into a leadership role for your younger replacement, it may help to begin the handover process several months in advance.

As financial planners, we recommend that your exit strategy begins at least five years before the milestone arrives. This is to ensure your paperwork, tax documents, wealth position are all in line for a successful exit and comfortable retirement.

So, if you’re in the final year of this stage, now may be the time to start readying your replacement. This initial phase might include:

• Choosing the right person for the job and negotiating their terms
• Solidifying your position as the retiring business owner – will you maintain some shares and remain involved, or fully sell up and exit?

Setting these actions in motion now could mean that no stone is left unturned when preparing a new person for the role.

2. Instil confidence in your successor

Even if they don’t show it, your successor might be feeling nervous about filling your shoes. If you started the business yourself, or inherited it from your own parent or grandparent, continuing your legacy is a great honour that comes with significant pressure.

With this in mind, it’s important to balance toughness with encouragement. Your son, daughter or grandchild is likely to understand just how hard the role might be – but they also need to know that they’re entirely capable of fulfilling it.

Some helpful tips to inspire confidence in your replacement include:

• Let them know when a project goes well. It’s easy to form the habit of withholding praise and only reaching out when a mistake has been made. Make sure you’re praising good moves while providing constructive criticism for areas that require improvement.
• Encourage them to bond with the other members of your team. Feeling supported by all colleagues, not just by you, could boost their self-esteem as a leader.
• Allow them to start leading now. Although you may still be situated as leader of your business, encouraging your eventual successor to head up certain projects and tasks could give them the confidence they need to thrive after your retirement.

Apply these confidence-building tips from now on and you may see their progress accelerate.

3. Make sure they have a support system in place

If your child or grandchild has worked for your business in a more junior role for several years, they may already know how your company operates. But it’s likely that there are some issues you’ve dealt with privately – be it financial worries, legal disputes, or even the personal stressors of your role.

While it may have been appropriate to shield this younger person from these issues at the time, now is the moment to explore the harder parts of the job, making sure they have the right support when these inevitably stressful moments arise.

For instance, you could have found that the role has taken its toll on your mental health over the years. Research published by Sifted reveals that 85% of European business founders say they’ve experienced high stress in the last year, and 75% have dealt with anxiety in the same period.

Opening up about your experiences might make this member of the next generation feel less alone. Encouraging them to speak to their loved ones – including you – and to seek help through counselling if needed may make all the difference down the line.

4. Ensure all your company’s documentation is up to scratch

There’s nothing worse than inheriting a “messy” set of projects and documentation when you begin a new role – particularly a leadership position that requires you to spin many plates at once.

So, do your successor a huge favour and begin organising the company’s documentation now, if you haven’t already. Hand over a clean slate of well-organised finances, project paperwork, and HR documents if needed – this will bring the next leader of your business great peace of mind.

5. Work as a team until your retirement date arrives

2025 might still seem far away, but in fact, time is likely to fly by between now and your retirement date.

With this in mind, it’s worth keeping your successor close from now on, showing them the ropes and making them feel at home in their new role. Plus, working as a united front for the coming months will not only help them, but it could also take some pressure off your shoulders as you get ready to exit.

Together, you can spend the coming months planning for your company’s bright future and ensuring conditions are just right for a smooth transition of power.

Personal financial planning can help you enjoy the fruits of your labour

You might be so preoccupied with preparing for your retirement that you haven’t readied your personal finances for the eventual decumulation period.

At iQ Financial, we specialise in working with business owners just like you, helping you to curate a personal financial plan that lets you enjoy the fruits of your labour.

Email us at clients@iqf.ie, or call 353 71 915 5560.

Please note

This article is for information only. It does not constitute advice.

It describes financial planning services that iQ Financial can offer to you. Financial planning services are not regulated by the Central Bank of Ireland.