Flexibility and timing are key to easy succession
Monday, April 1, 2019
When Terry Scanlon started his commercial print company, the day he finished work for good was not perhaps uppermost in his thoughts.
The former was over 30 years ago, but ideas of the latter started to surface as retirement loomed. Scanlon launched West Port Print & Design in the 1980s and watched it grow with pride throughout the 1990s, into the noughties and beyond. At this point, he came to realise that creating a solid succession plan now would ensure his legacy remained long after he had retired.
But how was he to define his legacy, how could he ensure business continuity, and how could he identify his successor? Succession planning is a complex process that draws on several business disciplines and pulls on many emotional strings. In some cases, for everything to stay the same continuity-wise, everything else must change, says the man who was to replace him.
Stephen Simpson joined the printer in St Andrews, Scotland, in 1997 and became a director in 2008. Meanwhile, his wife Claire Simpson focused on the artwork side of the business. Although there was a loose plan for husband and wife to eventually buy the firm, settling on the right time and hitting on an exit strategy that suited both Scanlon and the Simpsons was a tricky balancing act.
Many privately held businesses have an abundance of professionalism and rack up strong profits in their daily operations, says Simpson. Yet many can fail to properly plan for and complete the transition to the next generation of leaders. Even the most sophisticated and knowledgeable business professionals can get snared in a web of complicated issues.
And this succession held an extra human dimension. Scanlon is Claire’s father, and when son-in-law Simpson joined West Port in 1997, the company had just undergone a rebrand.
Simpson had no idea “if I’d be here for a year, two years or whatever”, but what focused the mind five years ago was that Scanlon was turning age 64, thinking of the future, and how he would like to spend it.
Long summers in Portugal appealed more than day-to-day orders of greetings cards and flyers, large-format posters and banners for the Ryobi machines – anything from a £10 copy job to 10,000 brochures. A sister company, printbroker Formlink, was bought around five years ago and the two businesses employ just over a dozen staff, making a combined turnover of around £1m.
“We didn’t have lots of options when it came to succession,” says Simpson. “We are not a £10m-turnover company with shareholders and a dozen family members – and neither Terry nor myself wanted to go down the route of using bankers and lenders. Being small is easier in some ways, but changing leadership and keeping your business running smoothly and profitably can be daunting.”
One of the biggest issues of company succession is timing, says Simpson: “The process tends to be governed by one person and when it is right for that person to go. But a key point for this company was that the succession plan wasn’t carved in stone; it was an evolving process. Our plan was not a massively long process to develop and execute, and it did not involve overly lengthy discussions.
“Perhaps an economical succession in time and detail is more effective, as disruption is minimised and businesses can continue running smoothly without everything grinding to a halt to accommodate change. Although Terry had been thinking about retiring, it was only early last year when he said ‘by the end of the year I want to be out’, giving focus but not too much time to complicate matters.”
Scanlon and Simpson did take advice from lawyers and accountants on how to structure a buy-out from one to the other. The team had to work through figures to assess how much the company was making and how much it could afford to buy the company from Scanlon and over what time period. The key to the transition, says Simpson, is the success of the business.
But there is no “crystal ball”, which can make forecasting a company’s growth difficult and nerve-jangling. Scanlon was to receive about £750,000 for the business in instalments – £100,000 in the first year – for a period of between five and seven years. The two-year tolerance would cover possible downturns or blips in business achieving growth.
“We can’t tell exactly how business will pan out, but we based the figures on our last three years. There is a bit of pressure, as we have to pay Terry over the next five years. If things go the way they have been, it should be fine, but if sales go down or a big customer goes away, the calculation might no go quite so well. But there is flexibility, so it won’t be a disaster.”
Business has been “pretty good”, with a “bit of growth this year”, says Simpson. To ensure it stays that way, a minor staff restructure is helping him “step back from the small stuff and focus more on higher-value sales”. A new production manager has freed up Simpson to ease up on all those day-to-day print jobs; while an employee in accounts will take on general enquiries.
“In a year’s time, my role should be like that of a finance director focusing on sales and my aim for this first year is to spend 70% of my time on business development. One of the most difficult aspects of the succession for me has been switching focus from day-to-day work to sales and overseeing the business, which is taking some time, so the restructure should help.”
Just as flexibility is built into the succession financials, the plan itself is fluid enough in other areas to give Simpson and his staff the time needed to adapt. Succession plans, he points out, “are not promises” and as such it is important they don’t come with unrealistic development expectations for the business or its people.
“The only thing I would have done differently is to have brought the succession forward a little – I am now aged 47 and would have liked to have done it when I was about 40. I love the idea and workings of a family business, but the drawback is the person at the top is often the sole owner who has run it for a couple of decades or so, and you have to wait until the time is right for them.”
The time is right most days for Scanlon on his extended stays in Portugal. He has not however cut all ties with the child of his creation, and retains ownership of the West Port Print & Design premises in Scotland. On visits back, he mentors staff and will hold a consultancy role for a couple of years, enabling him to balance his uppermost thoughts on both business and life in the sun.
West Port Print & Design
Location St Andrews, Scotland
Inspection host Stephen Simpson
Size Turnover: £1m; Staff: 13
Products Business cards, stationery, post and greetings cards, flyers, leaflets, books and folders as well as large-format material such as posters, banners, roller banners, box canvas prints and Skybond metal signs
Kit Ryobi 524 four-colour litho press, a Ryobi 512 two-colour press and two single-colour Ryobi machines, a 3200 and 510, digital kit including a Ricoh Pro C7100 printer and Epson large-format kit
Inspection focus Successful successions
Start early: succession planning takes time, so take as much as you need to ensure a smooth transition – typically five to 10 years ahead of an expected retirement
Learn to let go by delegating and working alongside the successor – and making sure your successor also learns to let go of his or her production tasks to move into management
Be flexible and remember your succession plan does not have to be carved in stone, but is an evolving process that can be changed and updated – business and owner need flexibility
Keep it simple: an economical succession plan in time and detail can minimise disruption, promote a smooth transition, and prevent everything grinding to a halt, says Simpson