Deciding how you’ll exit your business is just as important as any other aspect of running it. Even though you might currently be in the thick of building your company, it’s important to think ahead and have a plan for what will happen when you decide you’re ready to move on.

For many business owners, their most desired outcome is for their family to take on the MD position, rather than handing it over to a third-party buyer. That way, everything you’ve built remains in the family and you can rest assured knowing that it will continue to be run in the way you would hope.

This is a noble and meaningful way to exit your company. But equally, it’s important to remember that there’s a lot for your family to think about when taking on this responsibility. And, if you don’t help them prepare, your loved ones may feel overwhelmed if they don’t know what’s expected of them.

So, read on to discover five effective tips that could help smooth the transition when you look to pass the reins on to your family and they inherit your business.

1. Gauge your family’s interest and speak openly with them

First and foremost, it’s vital to talk to your family members and make sure that they’re as excited about the prospect of inheriting the business as you are about passing it to them. Otherwise, you could be placing a significant burden on their shoulders that they don’t actually want.

Invite everyone to participate in these conversations and encourage honesty and openness. Leave no stone unturned as you ask questions about who would be interested and in what capacity.

It can also be helpful to avoid making assumptions about any of your family members. For example, you might have one child who you think will have no interest in being involved, but who may actually have a desire to contribute to the business you’ve built.

As part of these discussions, it’s also vital to be specific about who will be responsible for what when you transition away from your role.

Indeed, if there are lessons to be learned from the hit TV show Succession, it’s that passing on a business to your children when they don’t know who will be in charge is a recipe for disaster.

All in all, it’s key to start with some discovery conversations that help you gauge the interest of your family members and offer some insight into what they can expect when running the company. Make sure everyone is on the same page so there are no surprises when the time comes.

2. Start sooner so you can gradually retire

Once you’ve had these initial discussions, it’s important to begin taking concrete steps and putting a solid plan in place.

There’s no hard-and-fast rule for how long before you step back you should initiate doing this, but it can be sensible to leave yourself at least six months to a year. Of course, as with planning of any sort, the sooner you start making arrangements for the future, the easier it will typically be.

Name your successor (or successors) and put this somewhere formally in writing. Then, you can begin the process of legally transferring assets into their ownership.

It can also be useful to do this so that you have a clear goal, making it easier to envision what the future of the business will look like.

3. Pass on your knowledge and expertise while you’re still working

Whether you built your company from the ground up or took over from someone else – perhaps even your own parents – you’ll have no doubt built up a huge depth of knowledge and expertise in your time running your company.

This could be specific to your company’s product or service. Or, it might relate to business goals and broader operations where you’ve been able to add significant value.

Either way, this experience is no doubt a huge part of what made your business successful. As a result, it’s crucial to pass on your knowledge as best you can to your family members so they can draw on it and use it to their advantage.

This could involve a formal training programme that you recommend your successors enrol in. Or, it could be a more hands-on shadowing opportunity, with them working alongside you while you show them the ropes.

Whichever one most suits you and your relationship with your family members, keep in mind that you have been key to your business, and they can learn a lot from you in making it a success.

4. Give them access to essential documents and systems

Alongside running the business itself, there are also simple, practical considerations to remember about handing over control.

In the past, this would likely have been exclusively documents and where to find them. However, in the digital age, it’s important to think about the computer systems they may need to access, and any passwords they may need to do so.

After all, the last occurrence any of you wants is your successor to be locked out of key systems they’ll need to run the business. They could lose valuable time and even money if they’re unable to access these crucial assets.

Furthermore, you might want to create a list of important contact numbers, such as suppliers and contractors you worked with, so they have a record of useful contacts should they need them.

These aspects might seem less important, but they are just as crucial to the continued success of your business.

5. Help them organise their finances as a business owner

Having run the company yourself, you know the immense demands that being a business owner puts on you, especially your finances.

While all your energy goes into making the business a success and carefully managing accounts and cash flow, your personal finances can go by the wayside.

Fortunately, you’ll have learned the importance of managing your wealth at the same time. Whether that’s knowing how to tax-efficiently extract income from the company, or being suitably protected against the unexpected, you know that it’s just as important to make sensible decisions with the money you generate from your work as it is to earn it in the first place.

So, instil this lesson into your children and explain how effective financial planning can ensure they’re able to enjoy the fruits of their labour.

It could even be useful to bring your family member along to your financial planning meetings. That way, they’ll see the value of planning in real time and find out how working with a professional can help them achieve their goals.

Get in touch

If you’d like support from an experienced financial planner, either for you or your family members, please do get in touch with us at Cordiner Wealth.

Email hello@cordinerwealth.co.uk or call 0113 262 1242 to find out more.

Please note

This article is for general information only and does not constitute advice. The information is aimed at retail clients only.

The Financial Conduct Authority does not regulate tax planning.

Note that protection plans typically have no cash in value at any time and cover will cease at the end of the term. If premiums stop, then cover will lapse.