Succession planning for your business – why does it matter?

Succession planning is a crucial yet often overlooked part of running a successful business. Whether you are considering retirement or just planning for the future, having a clear exit strategy ensures that you have identified how your business ownership will transition and potentially how you can continue to benefit from the value you created throughout your time growing and running the business.  

Here we explore the succession planning options that are particularly suitable for small and medium-sized businesses. 

What is succession planning?  

Huge multinational organisations are not the only ones concerned with who should take control of a business when the current leader moves on, dies or retires. 

Succession planning means preparing your business for a change in ownership at some point in the future. This could mean selling it to a new owner, transferring a family business to the next generation, or putting the business into the hands of its employees. A comprehensive succession plan minimises disruption, maximises value and ensures a smoother transition.  

When should I start succession planning?  

Received wisdom suggests that the ideal planning window is three to five years before you intend to leave. However, major life plans such as retirement, ill health and even death, are not as predictable as we may like to think they are. So, it is good to have an idea of the strategy the business will take much earlier than this. Understanding the future direction on succession gives stability to the business and can help keep staff turnover low by reducing uncertainty. 

Creating a solid yet flexible succession plan also provides time and focus to increase value and resolve any issues without stress or rush. 

What are the succession options for my business? 

There are almost as many options as there are businesses. The alternatives open to you will depend on many factors including: 

We have set out a number of different ways for ownership of your business to transition and the suitability of these options will depend on your goals and circumstances. 

Closing the business  

Closing the business is not a succession plan per se, but rather the baseline position if no succession or exit can be achieved. Closing the business would mean that it ceases to trade. If the business is a private limited company, it would usually be struck off or liquidated. 

Sale to a third party or competitor  

Selling your business to an external investor or a competitor looking to grow their business through acquisition is a possibility. Selling to an external investor may be the way to maximise the value you achieve but typically they look for larger businesses to buy and the sales process can be lengthy.  A competitor looking to expand their market share may be a suitable exit route. The path to a future sale requires keeping a keen eye on what is happening in your sector and local area. Are similar businesses being consolidated? Are there any investors specialising in your type and size of business? 

Management buy-out (MBO)  

In an MBO, your existing management team purchases the business. This ensures continuity and can be a faster, more discreet sale. Sometimes your existing manager or team may invite other professionals to buy in with them. The sale price may be paid in instalments under an MBO, so you may not receive all the proceeds immediately. 

Passing on the business  

If you want to keep the business in trusted hands, you could consider passing it on to a family member or your employees.  

Transfer to a family member  

Many of the most famous businesses in the UK are family owned and passed down through generations – from the largest, such as Warburtons, which is currently run by its fifth generation of owners, to the smallest such as many the many SMEs which form the backbone of the local economies of the UK.  

If your priority is legacy rather than achieving sale proceeds, passing the business to a family member could be the right option for you. This succession route depends on there being a family member with the right skills, experience, ability and enthusiasm to take on this challenge. Training them up to take over is a process that could begin many years before the transition of ownership takes place. Ensure the chosen individual is prepared and supported for that transition.  

Employee Ownership Trust (EOT)  

For those who own their business through a limited company, selling the company to its employees is an increasingly popular route.  An EOT allows you to transfer ownership to employees via a trust, so that the employee population indirectly owns the company. It promotes stability, preserves culture, and offers generous tax relief for both the selling owner and the employees. You would typically receive your sales proceeds over time from the future profits of the business. 

How do I prepare my business for succession? 

Preparation is key to a successful handover. Things you should expect to need to do nearer the time of transition include: 

Succession planning can help secure your financial future and protect the business you have built. For tailored advice on selling or transferring your business, contact our team today.  

Last updated: 25th September 2025