Construction Futures Wales - Succession Planning Workshop

1. Rob Beattie, Enterprise Consulting
Succession Planning

2. Todays AGENDA
HOUSE KEEPING
➢ Construction Future Wales
➢ Succession Planning
➢Exiting/Selling the Business
➢ Day to Day Continuity Plan
➢ Risk Management and Emergency Plan
➢ Can CFW Assist You

3. Why Bother?
➢Programme jointly funded by Welsh
Government and CITB in Wales
➢Targeting Welsh Construction related SME’s
that want to grow and prosper
➢Running until end of March 2019
The Programme

4. ➢CFW helps companies providing opportunities for them to
learn about improved business practices assisting them to
increase turnover and profit, and maybe gain competitive
advantage when securing future work
➢With key Welsh Government Targets being : -
➢Revenue Growth
➢New Jobs Created
➢Jobs Sustained
➢Jobs Assisted
Aim
Purpose

5. ➢Seminars and Events
➢Supply Chain Sourcing (MTB)
➢Supply Chain Networks
➢1 to 1 Individual Support
➢Training/Management Development
➢Company Benchmarks
How?
Activities

6. Management Development & Training to gain
a Postgraduate Certificate (PgC) or Diploma
(PgD) in Business Management, focused
around construction business management,
with workstreams that you can deliver and
improve your business all delivered by Cardiff
Metropolitan UNI in Cardiff and North Wales
Training
Training

7. Shared Understanding
Construct Futures Wales provides support specifically designed to
meet your company’s individual needs.
Starting point establishing a shared understand of your business
taken from 5 unique perspectives:
• Strategy
• Process
• Customers
• Learning & Growth
• Financial Management
Do you know how you compare with your peers across the UK?
0
2
4
6
8
10
Strategy
Perspective
Financial
Perspective
Customer
Perspective
Process
Perspective
Learning and
Growth
Business Excellence
Score
Acme Builders
Shared Understanding

8. Succession Planning

9. ➢Today is about reflecting and maybe
understanding a little better elements of
succession planning that relate to ….
➢ Exiting/Selling the Business
➢ Day to Day Continuity Plan
➢ Risk Management
Objectives

10. Exiting/Selling the Business

11. 7 Mistakes Selling your Business

12. 7 Mistakes Selling your Business
➢ Poor Record Keeping will reduce value
➢ Selling on Reducing Revenue will reduce value
➢ A Confidential Process may reduce confidence ….?
➢ Do Not Check Out of your Business
➢ Making Big Purchases (Unless in Business Plan)
➢ Realistic Valuations (Generate competitive interest)
➢ Right Legal and Accountancy support

13. Exiting/Selling your Business
The Past
Record Keeping
Today
Succession Plan
Risk/Emergency Plan
The Future
Business Plan
Marketing Plan

14. Closing your Business
➢ Closing your business, costs re
➢ Employee payments & redundancies
➢ Informing and paying suppliers
➢ Inform leasers and settle agreements
➢ Dispose of assets
➢ Prepare final profit and loss
➢ Pay and close HMRC accounts for CT/NI/ VAT

15. Exiting your Business
➢ In principle and process includes
➢ Passing across to family members
➢ Selling to an existing partner
➢ Management buy-out by existing team
➢ Selling to a 3rd Party
➢ Selling your business
➢Have you talked to key colleagues, family, friends
➢Professional Advisors that might include financial, legal and
industry specialists
➢Is your business profitable and marketable

16. Exit Preparation
➢ Preparing your business information
➢ Finances & Assets
➢Financial statements over 5 years – P&L/ Balance sheet
➢Details of physical assets such as machinery, buildings, equipment, and
stock
➢Details of other assets such as goodwill towards the business and
intellectual property
➢ Legal information
➢Legal documents such as leases and insurance policies
➢Registration papers such as business name certificates, licenses, permits,
and any other papers that demonstrate you comply with regulatory
requirements

17. Exit Preparation
➢ Business profile, procedures and plans
➢Business history such as start date, ownership changes, and location
changes
➢Business procedure documentation such as marketing, staff roster
and customer service procedures
➢Business plans such as marketing, emergency management and
growth plans
➢Market conditions such as details of competitors, and how your
business compares to them
➢Sales information such as reports and forecasts
➢Other details such as opening hours and whether the business
premises are owned or leased

18. Exit Preparation
➢ Staff, supplier and customer information
➢Employee details such as job descriptions, skills and
experience, work history, performance reviews, and pay
rates
➢Supplier details such as supply agreements and supply
prices
➢Customer details such as customer profiles, contracts,
numbers and marketing activities

19. Valuing your business
➢ How to value your business £ – options include,
➢ Look at current marketplace value and your industry
➢ ROI Method, ROI = (net annual profit/selling price) x 100
➢ Use your business' assets to calculate value – tangible and intangible
(goodwill)
➢Goodwill – can include customer loyalty and relations, brand
recognition, staff performance, customer lists, reputation of your
business, business operation procedures
➢ Find out the cost of creating your business from scratch
➢buying stock, buying equipment and tools, getting licenses and permits,
recruiting, training and employing staff, developing products, marketing
and promotion, buying or leasing premises, setting up an online
presence etc.
➢ Estimate the future profit of your business, or asset re-utilisation

20. Find buyers for your business
➢Advertise or not to advertise ……….?
➢Find potential buyers through a number of methods,
including;
– business brokers
– advertising online
– your existing networks (e.g. family, friends, or employees)
– advertising in trade publications or using your industry contacts
– word of mouth
– notifying customers of your sale (as long as you're confident it
won't harm your business if your customers know you're looking
to sell).

21. Negotiate the sale
➢Make sure information you give is accurate and true
(Purchaser and Lender Due Diligence)
➢You’ll need to agree with the buyer on a range of things,
including:
➢ the sale price
➢the settlement period (Warrants & Indemnities)
➢ non-completion penalty
➢ retained equity, knowledge and participation of the seller
(Restricted Covenants)
➢ arrangements for existing staff (Anti-Poaching)

22. Case Study

23. Case Study in Succession Planning
➢ CFW client based in South Wales
➢ Established 1986
➢ Family & Friend acquired the business early 90’s
➢ 2017 Turnover £1.7m
➢ 27 FTEs
➢ Plans to grow to £3.5m/ £4m in next 5
➢ ISO 9000 accreditation

24. Case Study in Succession Planning
➢MD took over from Farther 4 years ago
➢Progressed through the company having started “on the
tools” and worked his way up through the company
➢Has had CFW support for the Companies ISO9000
➢Has attended Cardiff Met CFW Management
Development
➢Has seen his farther enjoy a brief 3 years retirment
➢Wanted a future for the business and a planned exit to
his own earlier retirement

25. Case Study in Succession Planning
➢ Shareholding 1st January 2018
➢ 40% current MD, 40% shareholder 2, 20% shareholder 3
➢ MD had progressed through the company having started “on
the tools” and worked his way up through the company
➢ MD motivated by desire to
➢ “protect fathers legacy” (who had founded the company)
➢ Invest in the business’ people
➢ Secure his exit from the business in approx. 5 years time
leaving the workforce in a position to acquire his
shareholding

26. Case Study in Succession Planning
➢ The proposed exit strategy
➢To create a share ownership loosely on the John Lewis
Partnership model, workforce owning shares in the business
➢To purchase shareholder 2s 40% in 2018 and place this is a
trust for the benefit of the workforce.
➢Year end dividend would to paid to workforce based on a
performance management framework to be put in place.
➢To purchase shareholder 3s 20% in 2021 (can’t be acquired
before then due to legal covenants)
➢To transfer a further 9% shareholding in to the workforce
Trust

27. Case Study in Succession Planning
➢At his exit he would sell an additional 2% to the
trust
➢Securing an ongoing income based on dividend
payments
➢And/or
➢Having his shareholdings open to further purchase
by the trust over time

28. Case Study in Succession Planning
➢Can it work?
➢CFW working with Client to put in place robust
Business Plan incorporating Succession plan
➢Documentation & records will be key
➢Acquisition of 51% shares will need to be financed
➢Lenders will paw over all the business’ documents,
plans and the quality of the management team

29. Succession Planning

30. Succession Planning

31. A Plan for Exit
➢ Under the business and succession details section of your plan, include the following information:
➢ Business structure - sole trader, partnership, trust, company
➢ Current owner(s) covered - list current business owners covered by this succession plan
➢ Planned succession type - detail the succession you have planned and whether current
owners plan to depart the business wholly or partially, outlining future involvement where
only partly
➢ Successor details - detail (alternative) successor(s) and whether they're a family member,
business partner or someone you'll need to recruit
➢ Succession timeframe - detail when you plan to implement this succession and how and
when you'll communicate your plan to the organisation
➢ Restrictions - detail any restrictions on the successor, e.g. in a partial succession retained
control for maybe financial or branding decisions in summary as formal agreements will be in
wider contractual documentation
➢ Organisation - outline what the organisation might look like once you leave, and if the
successor is a current employee, also outline who will fill their current position, including any
positions that will be vacant after the reshuffle

32. Legal Considerations
➢ Under the legal considerations section of your succession plan include
the following information:
➢ Contracts & legal documents - Detail whether there is a legal document that
dictates the terms of the succession and describe the terms. Also list any
contracts that need to be drawn up or modified in the event of the
succession - for example, a partnership contract. Attach copies of any
relevant documents to the back of your plan.
➢ Buy-sell agreement - If you're in a partnership and you have a buy-sell
agreement in place, describe the terms. Detail whether your partnership
share will be sold to the remaining partners or open to family members or
external investors. Specify whether this arrangement applies to all partners
in the organisation.
➢ Will and testament - For each business owner, specify whether they have
drawn up a will and testament. If they have, detail what happens to the
business or their share of the business in the event of their death.

33. Succession Planning
Plan
People
Customers
Suppliers
Assets/Plant

34. Retaining Key Personnel
➢ Key Personnel - list all key positions in the organisation and the people that may
be expected to fill the position in the event of a succession. For each position
enter the following:
➢ Job title - Enter the job title for each position
➢ Retention – Develop retention strategies, recognition (scope of activities,
special duties etc), remuneration (Salary, Bonus, Allowances), and maybe
subject to succeed someone else
➢ Name - If known, enter the name of the employee expected to fill the
position. If unknown, add 'vacant'
➢ Skills required - Enter any skills, experience or qualifications required to take
on the position. For example, relevant qualifications and/or experience in
running a business
➢ Training required - Enter any training this person will require to fulfil their
new role. For example, on the job coaching and formal training in financial
management

35. Key Customer Relationships
➢ Key Relationships - list all key positions/individuals in the
organisation you do business with. For each key relationship:
➢Job title - enter the job title for each key relationship
➢Retention - develop retention strategies understanding where
key customer contacts fit within customer organisations
➢Growth - seek referrals to colleagues with similar responsibilities
in customer organisations
➢Continuity - seek to build relationships with key contact
management structures
➢New Opportunities – when key contacts move on look to retain
relationships and seek opportunities in new organisations

36. Key Suppliers
➢ Key Supplier Contacts - list all key suppliers you do business with and
their key contacts. For each key supplier:
➢Capacity - assess their capacity to support your growth plans
➢Risk – identify any risks in delivery from networks and business
intelligence
➢Retention - develop retention strategies understanding where you
can assist their ability to supply and support your organisation
➢Growth - identify strategic suppliers/partners and share and jointly
plan for growth
➢Continuity - seek to build relationships making key contacts that will
outlive key contacts
➢New Opportunities - when key contacts move on look to retain
relationships and seek opportunities in new organisations

37. Key Assets & Plant
➢ Key Assets & Plant - list all assets and plant key to the continuing operations of
your business:
➢ Capacity - assess capacity to support ongoing activities and growth plans
➢ Risk - manage and mitigate impact of asset failure on day to day service
delivery
➢ Retention - develop retention strategies understanding where key assets
support your organisations day-to-day operations and growth plans
➢ Growth - identify strategic suppliers/partners and evaluate own/lease/rent
on financial projections
➢ Continuity - seek to build relationships for alternative solutions sub-
contractors/hire
➢ New Opportunities – Are there alternative ways to develop key assets

38. Succession Timetable
➢Detail each phase of the succession process. For each
phase include the following:
➢Phase - Enter a brief phase description.
➢Succession action items - List the succession action items
that you need to complete for this particular phase.
➢Start date - Enter the date you expect to start this phase.
➢End date - Enter the date you expect to complete this
phase.

39. Risk Management & Emergency Plan

40. Contingency or risk management
➢ Detail the risks to the succession and any contingencies you'll have
in place. For example, detail what will happen in the event the sale
price you expect is not met. For each risk include the following:
➢ Succession risk - List the things that can go wrong while the succession plan
is being implemented. Also detail the potential impact to your business.
➢ Likelihood - Rate the likelihood of this risk occurring. For example, Highly
Unlikely, Unlikely, Likely, or Highly Likely.
➢ Impact - Rate the impact on your business if this risk occurs. For example
High, Medium, or Low.
➢ Contingency - Detail your contingency or alternative plan in the event that
this risk occurs.

41. Risk Management

42. Risk Management

43. Emergency Planning in your business
➢ Research and really understand your business, complete a risk
management assessment table with your risks, impact to your
business, likelihood, your mitigation strategies and contingency
plans.
• Complete a critical business area analysis and include each
critical business area, the impact to your business if they fail and
your current protection strategies.
• Develop a scenario based on your top three critical business
areas.
• Consider adopting business continuity standards and obligations
that could help your business achieve best practice.

44. Good Business Management
Exiting/Selling your Business
The Past
Record Keeping
Today
Succession Plan
Risk/Emergency Plan
The Future
Business Plan
Marketing Plan

45. ➢ Invaluable and important for : -
➢ Acquirers
➢ Lenders
➢ Customers
➢ Suppliers/Credit Providers
➢ Management
➢ Your people
Good Business Management

46. What can CFW do for you

47. ➢ 1 to 1 company projects to provide :-
➢ Planning templates
➢ Company Workshops
➢ Support the production of
➢ Business Plans
➢ Succession Plans
➢ Risk Management Plans
➢ Marketing Plans
➢ Social Media Plans etc.
CFW Support

48. Q&A Session