LEE STAMP, a director and family business specialist at PwC Newcastle offers readers his expert advice. 

Question: "I have spent over 20 years working hard to build what is today a very successful business. I feel I have now earned the right to a leisurely retirement and am thinking about succession. Does that really mean handing everything over to the kids or are the other options available to me? What do I need to be thinking about and when?"

Lee Stamp: “Succession is a sensitive moment in a firm’s evolution so it can be tempting to postpone any discussion about it, but this is almost always a bad idea. It’s crucial to anticipate what the transition process is likely to be and the issues and emotions it’s likely to generate, so you can start to prepare as early as possible.

“Many family firms find it difficult to manage the moment of transition from one generation to the next. There can be disagreement about whether to sell the business or hand it down, and many businesses can be unsure about either the aptitude or appetite of the next generation.

“There can also be disagreements about future strategy and direction with younger family members presenting new ideas that may be at odds with your view of the future.

“As the owner, you therefore need to have a long-term vision for the future of your business and a strategy for achieving this. This will help clarify the options you’ll have when you retire.

“There are normally four choices for family firms at the point of succession: a full handover to the next generation, the transfer of ownership to non-family professional management, a sale, or a flotation. Each raises different issues and a full evaluation of possible options should take place to ensure the right one is chosen for your long-term vision of the business and retirement plans.

“If you decide to hand over to the next generation, younger family members may need support, and perhaps specific training, whether they’re going to manage the business themselves, or are to be effective shareholders for a new non-family CEO.

“If you decide to sell or float, major changes may be needed to ensure that your firm is an attractive prospect for a private equity house or commercial buyer.

“Firms often underestimate the potential conflict that succession planning can cause, with inadequate measures in place should an actual dispute arise. It’s important for you to review your conflict management methods well in advance of a succession point, as part of a thorough review of governance procedures.

“Whether you decide to sell, float or hand over your business, each has complex tax issues that arise. The tax consequences of transferring the ownership of the business can be significant, and in extreme cases can see all the value added by one generation wiped out at the moment that the firm passes to the next. There will be a range of personal, inheritance, corporate and sales tax implications as the owner of the firm at the point of succession. Proper planning well before the event can ensure that your business is structured in the best way so there are no surprises and you can take advantage of all the tax reliefs available.”