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Plan for a smooth succession

22 May 2024

Plan for a smooth succession

The often thorny subject of business succession planning was addressed recently in a webinar organised by Point of Rental Software, which included experiences from hire industry professionals who had been through the process themselves.

Statistics suggest that some 40.3% of family business owners are planning to retire but that fewer than half of these expecting to do so within five years have identified a successor. And apparently only a quarter of UK family businesses have such a plan in place.

Necessary choices for business owners included whether it could be kept within their family, transferred to employees or sold to an outsider, and advice from a trusted legal consultant would be needed. Whichever route was chosen there would be inevitable management and cultural changes for personnel and customers.

Having accurate financial records would also be paramount, as well as identifying critical roles and responsibilities that would need to be preserved.

One case study was presented by Larry and Wayne Harris, brothers who had worked in a tool hire business in Ada, Oklahoma, that had been acquired and run by their grandfather and father from 1980. Party rental was added in 1985 and in 2023, following supply chain disruption and recruitment difficulties in the wake of Covid-19, the tool hire activity as sold to a competitor who had originally expressed interest ten years previously.

Over the years, numerous issues had to be negotiated about the ownership and running of the business, including Wayne’s decision to eventually leave and join Point of Rentals Software (in time becoming CEO).

The interests of other family members also had to be considered. Wayne said that their father’s transparency about the business and its procedures helped considerably for them and for employees.

Josh Nickell outlined his experience of working in his family’s rental business and its eventual sale to a larger competitor. Josh, who is now Vice President, Equipment & Events Segment, with the American Rental Association (ARA), said that succession planning should be considered virtually as soon as a business was founded, not lease because unexpected events could have an impact. It was as important as having a will and leaving instructions on future management.

Josh said there were opportunities to shape a business to make it more attractive to a future owner, such as the size and location of premises, as well as introducing new technology.

It was also important to put any agreements or wishes in writing to avoid any misunderstanding later, and valuing a business accurately would require sound third-party advice, ideally from a known and trusted source.

Josh added that last year saw more ARA member businesses being acquired by others than in any previous period. One reason for this was that, post-pandemic, companies had found it difficult to buy new equipment and to recruit personnel: by purchasing another business, they acquired both.

Photo: Jatinder Jeetu/Pixabay


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