Succession planning is no longer a distant consideration for Irish SME owners. With more than 60% of owners now over 55 and an estimated €2.5 billion in business ownership transfers anticipated by 2030, the demand for structured, strategic succession advice has never been greater. For accountants and advisers, this represents not only a critical risk area for clients but also a major advisory opportunity.

In his recent webinar Corporate Finance and Succession Planning, Tom Murray outlined a practical, real-world framework for preparing a business for succession: the Four-P Framework. This model—People, Profitability, Planning and Funding—highlights the core elements that determine enterprise value, financial readiness, and the success of any transition, whether through a trade sale, family succession, or management buyout (MBO).

1. People: The Foundation of a Transferable Business

The first—and arguably most important—pillar is People. A business reliant on a single founder or dominant personality is inherently fragile. Murray stresses that if the founder “was hit by a bus tomorrow,” the key question becomes: Who runs the business next?

Indicators of a people-ready business include:

• A strong second-tier management team with real operational responsibility
• Delegated authority and clear decision-making structures
• Customer and supplier relationships that are not dependent on the founder
• Emerging internal leaders who could anchor an MBO
• Transparent, fair roles for family members involved in the business

Red flags include:

• A founder who is the sole signatory for all major decisions
• A “cult of personality” where goodwill belongs to the individual, not the company
• Overpaid, under-performing relatives with unclear roles and unrealistic expectations

For potential buyers or funders, depth of management directly affects valuation, bank leverage, and deal appetite. A business must be able to stand firmly on three legs, not one—as Murray puts it, the organisation cannot collapse if one leg (the founder) is removed.

2. Profitability: Normalising Earnings to Reveal True Value

The second pillar, Profitability, is the engine behind enterprise value. Buyers aren’t purchasing past accounts—they are purchasing future maintainable profits, assessed today at a discount. Most transactions now centre on EBITDA multiples, making the quality and sustainability of earnings essential.

Advisers must help owners distinguish between:

• Reported accounting profit, and
• Normalised EBITDA, which excludes:
• Excess or below-market remuneration to owners

• Abnormal rent arrangements where owners control property

• One-off legal or restructuring costs

• COVID-related grants or exceptional events

Establishing a clear, credible, maintainable EBITDA is vital for:

• Supporting higher valuation multiples
• Securing stronger bank debt
• Improving cash conversion and free cash flow metrics
• Strengthening negotiating power during sale

A maximised and well-substantiated EBITDA directly influences the enterprise value—and ultimately the size of the owner’s retirement pot.

3. Planning: Governance, Preparation and “Grooming the Business”

The third P—Planning—is where many SME owners fall short. Murray emphasises that preparing a business for succession is not a three-month exercise, but an 18–36 month process to “glam the place up” before going to market.

Effective planning includes:

Governance

• Ensuring statutory registers, CRO filings, and shareholder agreements are up to date
• Structuring ownership agreements with provisions for death, disputes, and exit
• Addressing sibling- or family-related governance exposures

Financial Preparation

• High-quality, accurate, and timely accounts (minimum three years)
• A 3–5 year integrated financial model with validated assumptions
• Clean tax compliance, with no outstanding revenue queries

Risk Reduction

• Vendor-side due diligence preparation
• Early identification of weaknesses that might trigger price chips or deal-breakers

Strong planning reduces:

• Due diligence delays
• Warranty and indemnity exposure
• The risk of a “runaway bride” moment where deals collapse late in the process

Most importantly, it increases buyer confidence—and thus the price.

4. Funding: Structuring Capital to Enable the Transition

The fourth pillar, Funding, determines how a deal will be executed. Even the best-run business can fail to transition if successor managers or external buyers cannot finance the transaction.

Funding considerations include:

• Bank term debt, typically 5–7 years, sometimes amortised over longer periods
• State-backed options, such as SBCI’s Growth and Sustainability Loan Scheme
• Mezzanine or alternative lenders for larger or more complex MBOs
• Deferred consideration, which places financial risk back on the seller
• Equity from incoming management or investors

Where weaknesses exist in People, Profitability, or Planning, lenders and investors will:

• Reduce leverage
• Demand a bigger equity share
• Insist the seller carry a larger deferred element (while paying tax up front)

Poor funding readiness often means sellers accept lower valuations, rely more heavily on buyer performance post-deal, or fail to exit at all.

How the Four Ps Interact to Create or Destroy Value

Murray’s framework shows that weaknesses in any of the Four Ps amplify risk and compress valuation:

• Weak People → Banks restrict leverage → Investors demand more equity → Reduced take-home value
• Weak Profitability → Lower multiples → Reduced bank capacity → More risk shifted to the seller
• Weak Planning → Delays, failures, increased costs → Deals collapse or value erodes
• Weak Funding → Fewer pathway options → Forced trade sales or postponed succession

In the worst-case scenario—no successor, no buyer, and no funding—a business may face solvent liquidation, where assets are sold individually at reduced value, staff redundancies arise, and receivables become harder to collect. Murray notes that even in solvent wind-downs, owners typically realise significantly less than through a going-concern sale.

Conclusion: A Framework for Future-Proofing Irish SMEs

The coming decade will see unprecedented levels of ownership transition across Ireland’s SME sector. The Four-P Framework offers accountants and advisers a structured method to help clients future-proof their businesses and maximise value.

By strengthening People, enhancing Profitability, investing in robust Planning, and preparing appropriate Funding structures, SME owners not only protect their life’s work but also secure their financial independence in retirement.

Succession is not an event—it is a strategic journey. And the Four-P Framework provides the roadmap.

FAQ:

1. What is the Four-P Framework for Succession Success?

The Four-P Framework—People, Profitability, Planning and Funding—is a practical model that helps business owners assess how ready their company is for succession or sale. These four pillars determine enterprise value, deal readiness, and the likelihood of a successful transition.

2. Why is “People” the most important factor in succession planning?

Because if a business relies heavily on its founder, the company’s value and ability to transition decreases significantly. Buyers and funders want to see depth in the management team and evidence that the company can operate independently of the owner.

3. What makes a business “people-ready” for succession?

A people-ready business has:

A strong second-tier management team

Delegated roles and decision-making powers

Customer and supplier relationships not dependent on the founder

Clear, realistic roles for family members

Internal managers capable of leading an MBO

4. What are common people-related red flags?

Founder controls all major decisions

Overpaid or underperforming relatives

No identified successor internally

Customer goodwill tied personally to the owner

5. Why is profitability more important than revenue in a business sale?

Because buyers are ultimately purchasing future maintainable profits, not historic turnover. Profitable, stable businesses receive higher valuation multiples and secure stronger bank funding.

6. What is “normalised EBITDA”?

Normalised EBITDA adjusts accounting profit to remove unusual, one-off, or owner-specific costs. This reflects the true, ongoing earning power of the business and forms the basis for valuation.

7. What adjustments are typically made to calculate normalised EBITDA?

Common adjustments include:

Excessive or below-market owner salaries

Non-market rent paid to or by shareholders

One-off legal, restructuring or COVID-related costs

Non-recurring grants or exceptional income

Personal expenses run through the business

8. How long does succession planning typically take?

Most businesses require 18–36 months to fully prepare for a sale or ownership transition. Some improvements can be made within 12–24 months, but grooming the business for maximum value takes time.

9. What governance and documentation should be in place?

Up-to-date CRO filings and statutory registers

A solid shareholders’ agreement

Clear provisions for disputes, death, or exit of owners

Three years of high-quality financial accounts

A 3–5 year business plan and financial model

Clean tax compliance with no outstanding Revenue issues

10. What happens if a business goes to market without proper planning?

It leads to:

Lower valuations

Delays during due diligence

Higher warranty and indemnity exposure

Increased risk of deals collapsing late in the process

Reduced bank leverage for buyers

11. What funding options are commonly used in succession or MBO deals?

Typical sources include:

Bank term debt (5–7 years, sometimes amortised over longer periods)

State-backed loans such as the SBCI Growth & Sustainability Loan Scheme

Mezzanine or alternative lenders

Equity contribution from the management team

Deferred consideration paid to the seller over time

12. What is “deferred consideration” and why is it risky?

Deferred consideration means the seller is paid part of the price over several years. This is risky because the seller depends on the post-sale performance of the business—and pays tax upfront even though the full amount hasn’t been received.

13. How do weaknesses in People, Profitability or Planning affect funding?

Banks reduce leverage

Investors demand a greater equity share

A larger portion of the price becomes deferred

Some transactions become unfeasible

14. How do the Four Ps interact to influence business value?

A weakness in any one P reduces valuation and increases transaction risk. For example:

Weak People → lower bank support

Weak Profitability → reduced valuation multiples

Weak Planning → higher costs and deal-breaks

Weak Funding → fewer succession pathways

15. What happens if no successor or buyer can be found?

Without a viable transition plan, the business may face solvent liquidation. Assets are sold individually—usually at a discount—and total returns to the owner are typically far lower than selling the business as a going concern.

16. When should a business owner start preparing for succession?

Ideally 3–5 years before exit, but it’s never too early to begin. Early planning maximises value, strengthens negotiating power, and reduces the risk of forced or low-value sales.

The contents of this article are meant as a guide only and are not a substitute for professional advice. The authors accept no responsibility for any action taken, or refrained from, as a result of the material contained in this document. Specific advice should be obtained before acting or refraining from acting, in connection with the matters dealt with in this article.