Thinking of exiting your business? Start here.
If you’re one of the thousands of business owners thinking of leaving the business in the next 10 years, it’s time to start planning.
Having a succession (or exit) plan in place will make the process of transitioning out of your business much easier. Without one, the future of your business could be at stake. Early planning will also help you maximize the value of your business.
While transition and succession planning can be complex, CFIB is here to help you with crucial tools, resources and professional advice.Find an expert
What is succession planning?
Succession planning is the process of choosing the right exit strategy to protect your hard-earned business investment when the time comes to leave.
A succession plan starts with a vision of the future and finishes with the successful transition into the next stage of your life. Whether the goal is to keep the business in the family, pass it on to key employees or sell and move on, it’s a process that requires thought, preparation and time to implement.
Why should you plan your exit?
Having a succession plan will help ensure the transition goes as smoothly as possible. A well-designed plan will help you:
- Ensure the financial stability and value of your business
- Reduce the potential tax liabilities of transferring the ownership
- Set a timetable for transfer of ownership to your successor
- Provide stability for your employees
Get started with our free toolkit!
As you start to plan for your succession, you may run into many of the same hurdles and challenges facing other business owners. There’s a significant lack of resources to help you navigate this process, so we’ve developed a free toolkit to get you started.
The toolkit includes:
- Getting started: a succession planning checklist
- How much time do you need? Who will take over the business? These are just some of the basic questions covered in this checklist – a great first step.
- Business valuation checklist
- No matter which option you choose, putting a valuation on your business is a critical – and complicated - step. Use our guide to get started.
- Purchase and sale agreement checklist
- Selling to a third party? Use this checklist to make sure you and the buyer cover all the critical issues involved!
- Management buyout (MBO) development plan
- Structuring an MBO can take between 4-6 months, you can use this handout to help you understand the usual steps and timelines.
Exploring your options
The first step in succession planning is to examine your role and vision for the business in the future. How will the business grow and evolve? What needs to be done to realize this vision? Generally, the options are:
- Selling the business to a third party
- A management or key employee buy-out
- Passing the business on to a relative
Selling the business to a third party
Sometimes, the best strategy for all involved is to sell the business outright to a third party. This may, for example, happen when potential successors witness the time, effort and commitment a small business owner needs to succeed and decide they are not prepared to make a similar sacrifice. A sale can be structured in several ways, depending on the business owner’s objectives.
Use the checklist in our toolkit for guidance, whether you’re buying or selling!
A management buyout (MBO) is an increasingly popular exit strategy for owners of small businesses. This option is essentially the purchase of a company by part or all of its existing management. A management buyout is a way of achieving the owner’s goals for continuity of operation.
But not all businesses are suited to an MBO. This kind of transaction is particularly complex to structure. It takes time and some outside help from trusted advisors (see our list of experts) given that there are key challenges surrounding financing, identification of a leader, and communicating with employees.
Use the handout from our toolkit to understand the steps and timelines required for creating an MBO plan.
Passing to a successor / family
Many businesses successfully stay in the same family, sometimes through several generations. Succession planning should begin very early on – as soon as members of the next generation start to express interest in entering the business. For this to work, the owner’s children or other family members must have the appropriate education, skills, and experience to take over the business. The most successful transitions are where the owner involves their spouse and children early in the planning process. The entire family needs time to identify and discuss their perspectives and concerns and how they will operate in conjunction with the family business and with each other.
The tax and legal considerations are important factors in the successful implementation and outcome of any exit strategy, especially as many business owners rely on their business as their main source of retirement income. Professional advisors should be consulted early in the succession planning process. There are several tax planning opportunities to consider when determining business, personal and estate planning goals and strategies. For some owners, it may be best to transform their proprietorship or partnership into an incorporated business to benefit from some of the existing taxation vehicles.
CFIB members can take Vubiz’s succession course for free! The three-part course will help you plan for the transition, start the process of valuing your business and teach you how to get the best return on your investment when it’s time to sell.
- The 5 phases of a successful exit strategy (webinar)
- The 7 phases of buying an existing business (webinar)
- Planning for succession: how we’re fighting to ensure your retirement
- Lifetime Capital Gains Exemption – is it for you?
- Thinking of selling your business and want to know how much its worth? Try this free valuation tool.
- Six reasons to buy an existing business
Purchasing and running a small business is a huge decision that will impact your life for many years. CFIB is here to support you in this exciting new phase. With CFIB, you’ll get:
- More resources to deal with the daily challenges of running your business
- More savings on essential services, from payroll to payment processing
- A strong voice at all levels of government, so your business can thrive