At some point, every founder or business owner will step back. The question is whether you leave on your terms or let circumstances dictate the outcome.
Succession planning is about creating a roadmap for your eventual exit. You may be selling, handing down, or transitioning ownership in another way.
Far too many owners delay making decisions until they’re forced to act, which has a number of serious consequences:
According to a report from Charles Stanley in 2023, 37% of UK businesses have no formal succession plan in place.
Over a third of UK businesses have no clear succession plan.
Succession planning isn’t only about money. It’s about protecting the legacy you’ve worked hard to build, looking after the employees who made it possible, and ensuring the company continues to thrive.
Succession planning is a strategic investment in continuity, not an afterthought.
There are multiple ways to exit a business, but each comes with trade-offs.
The right option depends on your goals, the stage of your business, and what matters most to you. Whether this is financial return, legacy, or employee security.
Selling to another company is the most common route. It can deliver a clean exit and potentially a high valuation. But it comes with risks: culture clashes, redundancies, or loss of independence.
If your main goal is maximising financial value, this option is hard to beat, but owners should be honest about the cultural consequences.
Handing down the reins to the next generation keeps ownership in the family. But it’s fraught with challenges:
There is a study from the 1980s that found just 13% of family firms survive to the third generation, though a HBR study finds more room for optimism.
An MBO allows your existing management team to take control, while an MBI brings in an external team.
Both options require financing, often involving private equity or debt. They work well when there’s a strong leadership pipeline, but can stall if funding is complex or the management team lacks depth.
This is one of the fastest-growing succession options in the UK. Data from the Employee Ownership Association shows there were 560 transitions to EOTs in 2024 alone, with 2,470 employee-owned businesses in the UK collectively employing around 358,000 people.
Selling a majority stake to an Employee Ownership Trust (EOT) offers generous tax reliefs, secures business independence, and rewards employees.
This model has proven benefits for culture, productivity, and long-term stability. It’s particularly attractive for owners who want to safeguard their legacy and keep employees engaged.
Less mainstream, but valuable in specific contexts. Co-operatives are democratically owned by members, which might include employees, customers, or suppliers.
Hybrids combine indirect trust ownership with direct share schemes like EMI. These models can be highly resilient but require careful governance.
Each succession route solves different problems. Choose based on your values and long-term goals, not just the headline valuation.
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Successful succession doesn’t happen overnight. Ideally, start planning three to five years before your intended exit. That gives you time to prepare financially, operationally, and culturally.
According to Deloitte research on succession planning, 86% of leaders believe succession planning is an urgent or important priority, yet only 14% believe their organisations do it well.
Trevor Stevenson-Platt, a leading exit planner and the founder of Business Growth Institute, spoke to Vestd last year on our FounderMetrics podcast.
According to Trevor:
Exit planning is not just window dressing. The things we do are substantial changes that need to happen in the business. Some of them might involve restructuring the team.
"That's why I encourage everyone to start thinking about it as early as possible - it takes time."
Here’s what to prioritise:
1. Valuation readiness
Keep your house in order: clean financial statements, tidy cap table, documented intellectual property, and all contracts up to date. Buyers pay more for businesses with clarity and reduced risk.
2. Leadership pipeline
If you’re stepping away, who’s stepping in? Whether through family, management, or employees, leadership must be identified and developed in advance.
3. Employee engagement
Uncertainty kills morale. Share schemes can help to retain key people long term and maintain alignment. Incentives such as cash bonuses can also encourage key staff to remain during periods of transition.
4. Legal and tax structuring
Work with advisers early to avoid unpleasant surprises. Succession routes like EOTs or MBOs come with specific requirements for compliance and funding. A last-minute scramble is the enemy of value.
Succession is a multi-year project. The earlier you prepare, the smoother (and more profitable) the process.
It’s tempting to see succession as purely a financial or legal exercise, but any plans have to consider your team.
Employees are the ones who keep the business alive during the transition, and their engagement makes a big difference.
First and foremost, employees need transparency during succession, as silence leads to rumours and uncertainty. Even if you don’t have all the answers yet, honest communication builds trust.
Three things to factor in:
Training and development. Give employees skills that will be valuable under the new ownership model. This makes them feel part of the future, not disposable.
Retention incentives. Equity, bonuses, or profit-sharing schemes help retain critical talent. Without them, you risk losing people at the worst possible time.
Culture continuity. Employees want reassurance that the values and ways of working they believe in will survive the transition.
McKinsey research shows organisations with high employee engagement during transitions are 2.3x more likely to outperform peers. So treat employees as stakeholders in succession rather than bystanders.
Among all the succession options, employee ownership deserves special attention. It can be the commercially smart choice, not just a sentimental one.
The benefits include:
Tax advantages. Owners selling to an EOT can avoid capital gains tax, while employees can receive annual bonuses of up to £3,600 tax-free.
Business performance. Research has found that employee-owned companies are 8-12% more productive based on Gross Value Added (GVA) per employee.
Legacy protection. Selling to employees ensures the company isn’t swallowed up by a competitor with a different agenda.
Hybrid flexibility. You can combine a trust model (indirect ownership) with an EMI scheme, for instance (direct ownership), giving employees both collective and personal stakes.
The John Lewis Partnership is perhaps the UK’s most famous employee-owned business, but it’s not just for retail giants. SMEs across industries are using EOTs to future-proof their businesses while rewarding loyal employees.
Employee ownership ticks boxes for valuation, culture, and legacy, making it an attractive succession option.
Succession planning feels easy to put off, but waiting until you’re ready to leave is a mistake. A strong plan takes years to shape and protect both your business value and your people.
The following roadmap is designed to help you simplify the process.
Each step builds on the next, giving you the best chance of leaving on your terms while safeguarding your legacy.
Define your goals
Be honest about what matters most. Do you want to maximise cash from an exit, preserve your legacy, or reward the employees who built the business with you? Clarity here guides every other decision.
Evaluate the options
Trade sales, family handovers, management buy-outs, and employee ownership each solve different problems. Line them up against your goals and be realistic about the trade-offs.
For example, cultural continuity may matter more than chasing the highest valuation.
Start early
Give yourself three to five years to prepare. This window lets you clean up financials, strengthen leadership, and implement employee incentives before the handover. Owners who leave it late often end up taking the least desirable route.
Get the right advice
Succession is complex, and tax, legal, and financing rules can make or break your plan. Bring in specialist advisers who know the landscape, especially if you’re considering employee ownership or trust structures.
Communicate openly
Silence breeds rumours. Share your intentions with employees and stakeholders at the right time, and frame it around stability and opportunity. A clear message keeps morale steady and prevents disruption.
Incentivise your people
Employees who feel invested will work harder to ensure a smooth transition. Schemes like EMIs, cash bonuses, or profit-sharing arrangements keep key people on side during the succession process.
Document your plan
A written plan removes ambiguity. Capture the chosen structure, leadership succession, employee arrangements, and timelines.
This not only reduces disputes but also gives external buyers or trustees confidence in the business’s future.
Succession is a journey, not a transaction. The earlier you start, the more control you keep, and the stronger your business will be after you’ve stepped away
Succession planning is one of the most important strategic decisions you’ll ever make. The real test of succession lies not in who takes over but in whether the business thrives, employees feel valued, and your legacy lasts.
Whether you choose a trade sale, a family handover, or employee ownership, the secret is the same: plan early, focus on people, and align your exit with your values.
We help founders design and manage direct ownership models that reward employees and safeguard legacies.
In short, Vestd makes it simple to plan for the future.
Ready to start your succession journey? Book a free consultation with one of our share scheme specialists today.