Running a family business comes with a unique blend of opportunities and challenges; balancing legacy with innovation, and personal values with commercial goals. Yet, one area that often gets overlooked amid the day-to-day demands is long-term financial planning.
Armstrong Watson’s latest Family, Privately-owned and Owner-managed Business Survey found 16% of business owners have yet to consider a clear succession or exit strategy.
The majority of respondents are aged 55 or older, and while most have some form of exit planned, many are still unprepared, having not documented and communicated their plans to stakeholders or discussed their intentions with family (where they plan to pass on the business to the next generation).
With 18% of business owners looking to exit their business over the next couple of years, and more than two-thirds of respondents planning to exit their business within the next 10 years, the time to think seriously about succession and retirement planning is now.
Start planning for succession
Business owners are often consumed by running their business, leaving little time to plan for the future. But failing to plan can mean missing out on opportunities to protect wealth, secure a legacy, and ensure continuity.
Having a clear plan will help you focus on how to prepare for the succession of your business. There are numerous exit routes to take, including passing the business to the next generation, selling to trade, private equity, management buyouts, or a change of business structure to an employee ownership trust.
Adding urgency to succession planning are the upcoming changes to Inheritance Tax (IHT) reliefs, set to take effect in April 2026. Under the new rules, Business Property Relief (BPR) and Agricultural Property Relief (APR) will be capped at £1 million per individual. Assets above this threshold will only receive 50% IHT relief.
While there has been speculation that the Government might soften these proposals, Farming Minister Dame Angela Eagle has dismissed this possibility, stating: “There is no likelihood that that will happen…the Treasury have made their announcements, and they aren’t going to move.”
Under these changes, many family businesses, especially those that are asset-rich but cash-poor, could face significant tax liabilities upon succession. Without careful planning, heirs may be forced to sell parts of the business to cover the tax bill—potentially undermining decades of hard work and legacy.
Diversifying your assets in preparation for retirement
Interestingly, the top three exit strategies identified in the survey are unlikely to generate a financial return for the business owner. Many plan to either pass the business on to family, wind it down, or have yet to consider their exit at all.
This is understandable; we are all guilty of working in the business rather than on it, but there are options worth exploring.
A robust financial plan can help you gradually extract profits and diversify your retirement strategy beyond the business itself.
There are many potential savings and investment options, including but not limited to: pensions, ISAs and bonds.
These options cater to a range of risk appetites from cautious to adventurous. Some can even offer tax advantages for your business. The key is to build a diversified portfolio so you can access your “retirement income tap” at the right time, from the right source.
Considering a sale?
Interestingly, only 8% of survey respondents are considering a management buy-out (MBO) - when the current management team of a business acquires the company from the existing owners - despite its potential to offer continuity and a smoother transition, and 19% plan to sell to a third party.
If selling your business is even a remote possibility, speaking with a Corporate Finance adviser is essential. Whether exploring a trade sale, MBO, or other exit route, professional guidance can unlock hidden value and ensure the process is both financially and emotionally rewarding.
Focus on succession plans
Succession and retirement planning aren’t just financial decisions—they’re deeply personal ones. They require reflection, communication, and expert advice. Whether you're thinking about passing the business to the next generation, selling, or simply stepping back, the key is to start early.
If you would like support and advice around succession and diversifying your assets, please get in touch to speak with a member of our financial planning team. Call 0808 144 5575 or email help@armstrongwatson.co.uk.
