Succession Succession and retirement go hand in hand

Succession planning is often an emotional issue for entrepreneurs. Early succession and retirement planning can optimize one’s financial situation and increase security.

byUBS Insights 13 Jun 2018

There are few events in one’s working life as exciting as establishing and building up your own company. The emotions that go with this carry all the more weight when your life’s work is transferred to the next generation or even to a stranger. Often, this step is taken at the same time as retirement. The longer you are connected to the company, the more you feel irreplaceable. And any new purpose in life feels uncertain, too. For this reason, succession and retirement planning are often left to the last minute.

“The earlier, the better” is the golden rule for both retirement and succession planning. If you follow it, you can transition from working life to retirement gradually, and you will have enough time to find new perspectives for the next phase in your life. In addition, your business can be handed over without haste. Succession planning is a project that involves employees, customers and suppliers too. The clearer the communication, the more certainty everyone involved will have. The following checklists will support your planning.

  • Begin closing the contribution gaps in the pension fund 10 to 15 years before you retire.
  • Start transferring company assets to your private assets: Plan and optimize your wage and dividend payments early on.
  • Draw up a financing plan for your retirement that includes consideration of the following:
    1. Income and expenses after retirement.
    2. Available assets and expected return.
    3. How to compensate for the gaps generated through pension reductions if you retire early.
  • Define the date of your retirement: Register your AHV pension and a lump sum withdrawal in due course.

Personal preparation

  • Prepare for the change emotionally and define your future role in good time.
  • Avoid conflicting goals between personal and family goals – for instance, through a prenup or contract of inheritance.
  • Request an external assessment of the company’s value and adjust it with your own price expectations.
  • Review different succession models.
  • Define a time plan and exit your company gradually.

Preparing the company

  • Evaluate how your company is strategically attractive to third parties; determine whether your family or the company management is interested in taking over.
  • Make essential company and finance information clearly available to external parties.
  • Create sustainable management and HR structures; reduce dependencies on you personally.
  • Choose a time for communicating the succession. Weigh up confidentiality against transparency.
  • Review legal and tax circumstances and their implications.