Research reported by TaxAssist found that more than half of Irish family business owners expect to pass their business to the next generation within five years.

However, only 20% have a clearly defined succession plan, and Business Plus reports that 42% do not intend to put one in place.

Read why an effective succession plan is so important and discover some of the best ways to ensure a smooth handover when you are ready to retire or move on from your business.

Your business could be put at risk if you don’t have a succession plan

You may well have dedicated years, even decades, to building a successful business.

Alongside consistent hard work, one of the biggest contributors to your business’s success has been planning ahead. Achievements don’t happen by accident, and you’ll know that an effective strategy will have helped keep you on track and drive your business forward.

With all this in mind, it would be remiss not to have a plan for what happens when you’re no longer in charge.

And, although it is difficult to consider this prospect, you may not always be in control of how or when you pass the reins to another person. If this were to happen, an unplanned transition from one ownership to another can create all sorts of issues:

• Doubts over future leadership
• The logistics and timing of the transition
• A loss of confidence in the business, both internal and external
• Long-term financial challenges.

A well-designed strategy helps to address the above issues, and others, well before any planned succession actually takes place.

Planning also gives you time to work with trusted professionals to ensure your succession arrangements are well-informed and legally and financially secure.

It also means that when you reach the stage of wanting to retire or move on to other ventures, you have a roadmap in place to ensure a smooth transition with minimal upheaval.

Choosing the right person or people helps secure your business’s future in an uncertain time

Regardless of whether your business is family-owned or privately held, you probably already have an idea of who you want to run it once you step aside.

Planning gives you time to ensure that your chosen successor or successors have the experience and business knowledge required to do this, and will give you a clear idea of the optimum time to allow them to take over.

Making the transition of leadership smoother could have a positive ripple effect throughout your entire business. It could even help to avoid your company losing key employees at a time when stability is most needed.

Read more: Passing your business to the next generation? 5 tips for preparing your younger replacement

A smooth succession could improve customer retention at a critical time

You cannot always prepare for the loss of a key business leader. However, a succession plan could put guardrails in place so that important variables are controlled where humanly possible.

On the other hand, the absence of a clear and organised succession plan may create uncertainty internally, reduce the quality of your company’s service, and eventually push customers toward alternative providers.

With clear and actionable instructions set up ahead of time, your successors could manage customer relations and reduce the risk of losing your all-important clientele.

Key decisions to make when putting a succession plan in place

As you set about putting together a succession plan for your business, a good place to start is by having a clear idea of your wishes.

These are likely to include:

• Identifying who you want to succeed you
• Deciding what you would like the future of your business to look like after you leave, be it expansion, winding up, or selling to a competitor
• Preparing your successors for their responsibilities
• Working with professional experts to create a framework to facilitate the transition.

As you’ll be aware, businesses change over time. It may well be the case that your own business is very different now from how it was 10 years ago.

Because of that, your succession plans should be reviewed regularly to ensure they’re still appropriate to your current circumstances and future plans.

You may feel that alterations to your plan are necessary to reflect internal changes or external issues, such as changing market conditions.

We work with business owners and professionals to preserve their long-term wealth

Even if you believe you are some way off needing such a plan, it’s an issue that you should start thinking about sooner rather than later.

Your business succession strategy should also consider your personal financial position and your long-term estate plan.

If you would like to talk to us about your personal finances, please get in touch.

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