The finance directors role in succession and exit planning

Succession and exit planning are often seen as concerns for business owners alone. But in reality, finance directors (FDs) play an important role in shaping and executing these strategies. As the financial backbone of their organisations, FDs are uniquely positioned to guide leadership teams through the complexities of transitioning ownership – whether through a sale, management buyout, or generational handover.

In this article, we’ll explore what you as an FD need to know about succession and exit planning, why it matters, and how you can help ensure a smooth and successful transition. We’ll also touch on how you can act as a bridge between business owners and professional advisers, helping to future-proof the business and maximise value.

Why succession and exit planning matters

Succession planning is not just about preparing for retirement. It’s about ensuring business continuity, protecting value, and reducing risk. For many business owners, their company is their most valuable asset. Without a clear plan, the business – and its value – can be at risk if something unexpected happens.

Exit planning, on the other hand, is the broader process of preparing a business for sale or transition. It includes financial, operational, and legal considerations, and often takes years to execute effectively.

For FDs, understanding both is essential. Not only are you responsible for the financial health of the business, but you’re also a trusted adviser to the board and shareholders. Their insight can shape the timing, structure, and success of any exit strategy.

The FD’s role in succession and exit planning

FDs are often the first to spot the signs that a business is ready—or not ready—for transition. Here’s how you can contribute:

1. Financial readiness assessment

Before any succession or exit can take place, the business must be financially prepared. This includes:

• Clean financial records: Ensuring accounts are accurate, up to date, and diligence-ready
• Valuation preparation: Working with advisers to understand the true value of the business and how this may be articulated to future owners
• Cash flow forecasting: Demonstrating sustainable profitability and future growth potential

2. Identifying value drivers and risks

FDs can help identify what makes the business valuable to a buyer or successor. This might include:

• Recurring revenue streams
• Strong and diversified customer relationships
• Intellectual property or proprietary systems
• A capable and committed management team
• Developing growth opportunities. At the same time, you can highlight and mitigate risks—such as over-reliance on key individuals (such as the business owners), customer concentration, or outdated systems which could diminish value or even prevent a transaction being feasible.

3. Tax planning and structuring

• Tax efficiency is a critical part of exit planning. FDs should work closely with tax advisers to:
• Explore business asset disposal relief
• Understand inheritance tax (IHT) implications
• Identify and pre-transaction tax planning or company reorganisation is requiredConsider trusts and family investment companies) as part of the overall family and wealth strategy.
• Early planning can significantly reduce tax liabilities and increase the net proceeds of a sale or transfer.

4. Supporting the owner’s personal goals

FDs often have a close working relationship with the business owner. This puts you in a strong position to understand their personal goals—whether that’s full retirement, a phased exit, or retaining a stake in the business.

Helping the owner articulate their objectives is a crucial first step in building a plan that aligns with both personal and business needs. This will help in an overall assessment of the succession and exit options available to business owners which is the cornerstone of developing a strategy to achieve it.

Bridging the gap between owners and advisers

One of the biggest challenges in succession planning is communication. Business owners may be reluctant to start the conversation or unsure of where to begin. FDs can act as a bridge between the owner and external advisers, helping to:

• Initiate early discussions
• Coordinate input from legal, tax, and corporate finance professionals
• Keep the process on track and aligned with business goals

By taking a proactive role, you can help avoid last-minute decisions that may compromise value or create unnecessary stress.

Planning for different exit scenarios

There’s no one-size-fits-all approach to exit planning. FDs should be familiar with the main options available, including:

• Trade sale: Selling to a third-party buyer, often for the highest price but with more complexity.
• Management buyout (MBO): Selling to the existing management team, which can offer continuity but may require external funding.
• Employee ownership trust (EOT): A tax-efficient way to transfer ownership to employees, often preserving company culture.
• Family succession: Passing the business to the next generation, which requires careful planning and communication.

Each route has different financial, legal, and emotional implications. FDs can help model scenarios, assess feasibility, and guide decision-making.

Timing is everything

One of the most common mistakes in exit planning is leaving it too late. Ideally, planning should begin at least three to five years before the intended exit. This allows time to:

• Maximise business value
• Resolve any operational or financial issues
• Implement tax planning strategies
• Prepare successors or management teams

You can help create a succession timeline, with clear milestones and responsibilities, to keep the process moving forward.

Communicating with business owners

While FDs are often the main point of contact in the corporate market, it’s essential to engage directly with business owners too. Many owners are emotionally invested in their businesses and may be hesitant to plan for life after exit.

You can help by:

• Framing the conversation around value protection and legacy
• Highlighting the risks of not planning
• Encouraging early engagement with advisers
• Providing reassurance that the process can be managed on their terms

Succession and exit planning is not just a legal or tax exercise. It’s a strategic process that requires foresight, collaboration, and leadership. As an FD, you are uniquely placed to drive this forward.

By taking the lead, you can help ensure that the business is ready for whatever the future holds.