Do sole traders need to consider succession planning?

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Succession planning might not be important to sole traders if they've no intention of passing the business on as a result of their death, critical illness, accident or sickness. But there might be personal protection needs that have to be addressed, such as mortgage, personal loans, family protection, income replacement and inheritance tax (IHT) planning.

Some owners may be reluctant to plan ahead due to several factors, including:

  • resistance of owners to let go of the business
  • fear of retirement
  • inability to choose a successor who they thing could do the job.

Transferring ownership can be an emotional and complicated process. As a result, many owners find it easier to ignore succession and only deal with it when it suddenly becomes an issue, such as when they or a co-owner can no longer work through illness or death.

However, this will almost certainly result in disruption. If the business doesn’t have a committed leader for any length of time, this could result in lost sales, defecting staff and clients, and potentially business failure.