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Who’s next? How to build a solid succession plan for your business

October 7, 2019 ​​4 min read

 
It might seem like a long way off, but there’s no time like the present to plan your exit strategy.

“Planning is bringing the future into the present so that you can do something about it now.” 

So says a wise saying, and one that business owners should take to heart when considering their future scenarios. Do you know what will happen to your business when you retire or just want to move on to something new? What if you fall ill or worse? 

Business succession planning involves thinking about how you can transfer ownership of your business as seamlessly as possible to a family member, partner or employee, or to an external buyer.

What does a solid succession plan look like? 

Like all good planning, succession planning aims to address important questions in advance and provide a roadmap, rather than leave things to chance. It involves you looking into the future and considering your vision for your business in 5… 10… 20 years. Your succession plan will help you transition out of your business while minimizing your taxes, protecting assets and aligning with your retirement and estate plans.

Why start planning sooner rather than later?

Whatever your current situation and future aims, there are some compelling reasons to start planning now—even if your business has only been operating for a few years.s.

  • Know your options : If you want to sell your business, get an understanding of the type of buyers you might be able to attract now and in the future. Or, if you want the business to stay in the family, take the time to talk to family members and find the best successor. 
  • Ensure a smooth handover: Forewarned is forearmed. It’s not only you who can benefit from some clarity around your exit strategy. If, for example, you hope to hand the business over to a family member, the more time you have to prepare them, the more chance there is of a smooth transition.
  • Get the best price: If your plan is to sell the company, there could be things you can do well in advance to make your business as attractive as possible to a potential buyer. These include getting your books in order and documenting systems and processes.
  • Be prepared for anything: Even if retirement is a long way off, life has a habit of throwing the odd curveball or two. With a succession plan in place, if something unforeseen happens, you at least have a plan to help protect you, your family and your business.

Why start planning sooner rather than later?

  1. Speak to a professional: Consider consulting local specialists about your plan, including BC Chamber of Commerce, business advisors specializing in succession planning, family business advisors, tax and legal specialists, and financial advisors.
  2. Decide on an approach: Make some decisions around who will take over your business, such as a family member, someone already inside your business or an outside buyer.
  3. Prepare your successor: Starting succession planning early gives you plenty of time to train or mentor your successor. For example, you can start taking detailed notes about how you run the business.
  4. Create a roadmap: This is where specialists, such as business and wealth advisors, can help with things like valuing your business, finding a buyer, and tax and legal considerations. Coming up with a timeline helps you stay on track.

When your plan’s in a good place, don’t just file it away. Review it every so often and adjust it if needed, especially if your planned exit date is a long way off. Like making a will, thinking about a time when you’re no longer involved in your business isn’t easy. With a solid succession plan tucked away, that future will be a lot less uncertain.

Other topics to explore:

 Is your business ready for the unexpected
 Turn your business debt into an asset
 Expanding your business - 3 tips to growing locally
 The value of partnerships in growing your business

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