Top 10 barriers to business succession

Top 10 barriers to business succession

This article describes the top 10 barrier to business succession or exit.

These challenges often intertwine personal, operational, and structural factors.

Why These Barriers Matter, unaddressed, these challenges can lead to:

– Depleted business value due to rushed sales.

– Family disputes or legal battles.

– Tax inefficiencies eroding retirement funds.

– Loss of jobs and legacy if the business folds post-exit.

By recognizing these barriers, founders can proactively seek solutions

—such as engaging advisors, fostering transparency, and starting early

—to secure their business’s future and personal goals.

1.Emotional Attachment & Identity Loss

  • Founders often view their business as a “third child,” leading to reluctance to relinquish control.
  • Fear of losing purpose or identity post-exit can stall planning, especially in founder-led businesses tied to personal reputatio

2.Time & Resource Constraints

  • Day-to-day operational demands leave little bandwidth for long-term planning.
  • SMEs may lack dedicated HR or legal teams to manage succession processes, forcing founders to juggle roles.

3.Financial Complexity & Valuation Uncertainty

  • Difficulty valuing the business accurately (e.g., subjective goodwill in UK SMEs).
  • Navigating UK tax implications (e.g., Inheritance Tax, Business Relief, Capital Gains Tax) without expertise can deter action.
  • Concerns about funding retirement or post-exit income stability.

4.Successor Readiness & Availability

  • Scarcity of qualified internal candidates, especially in niche industries
  • Reluctance to invest in training successors due to cost or time.
  • External buyers may be scarce in volatile market

5.Family Dynamics & Conflict

  • Family-run SMEs face emotional tensions over fairness, competence, or legacy.
  • Pressure to prioritize family members over more qualified external successors.
  • Lack of formal governance structures to manage expectations.

6.Fear of Losing Control

  • Founders may micromanage successors or resist delegating authority.
  • Anxiety about changes to company culture or strategic direction post-exit.

7.Legal & Regulatory Hurdles

  • Complexity of UK company law, shareholder agreements, and partnership structures.
  • Risks of disputes over probate, wills, or unplanned exits (e.g., 40% of UK SMEs lack a will for their business).
  • Compliance with employment laws during leadership transitions
  • Market Conditions & Buyer Uncertainty

8.Economic volatility (e.g., inflation, interest rates) impacts valuations and buyer confidence.

  • Sector-specific risks (e.g., hospitality post-COVID) reduce exit options.
  • Overreliance on a single buyer or market increases vulnerability.

9.Lack of Expertise & Guidance

  • Limited access to affordable advisors (e.g., succession planners, tax specialists).
  • Misconceptions that succession planning is only for large corporations.
  • Overwhelm at the complexity of exit strategies (e.g., M&A, ESOPs, family handovers).

10.Procrastination & Short-Term Focus**

  • “It’s too early” mindset delays action until crises (e.g., health issues) force rushed exits
  •  Prioritizing immediate revenue over long-term planning.
  • Underestimating the time required to execute a plan