Building a Succession Plan

A succession plan is a strategic document that sets out the process and schedule for you to withdraw from your business. It includes the legal and other supporting documents you will need to put the plan into action.

You will need to consider “soft” issues – interpersonal relationships with family, employees, and other stakeholders and the need to maintain clear communications – as well as “technical” issues – the legal, accounting, and financing matters that are a part of any business.

A succession plan is a great tool for clarifying the options available to you and which one you feel will be best for you and your business. The plan will help you prepare your successor and your company and identify future staffing needs.

Evaluate the company's vision and plans for growth

This is essential, as your succession plan will work within the vision. By aligning your company’s mission and vision alongside the planning of your succession plan, you will be able to effectively plan the company’s growth strategy.

Identify any potential significant business challenges

What is the contingency plan if you are suddenly taken ill? Who would take over your responsibilities? Consider how the succession process would be impacted and how it should be continued if you are no longer there to manage it. Anticipating potential challenges will help you develop risk mitigation strategies and have a robust succession plan in place.

A formal succession plan should include information about matters such as:

  • The identity of the successor or successors.
    • Who could run the business?
    • List of stakeholders:
      • Family members
      • Business partners
      • Key employees
      • Franchisor or distributor
  • How the successor will be trained for his or her role.
    • Education
    • Experience
    • Technical abilities
    • Leadership skills
    • Communication Skills
    • The roles of other key managers during the transition.
    • The mechanics for the purchase or sale of shares in the business.
    • The distribution of ownership.
    • Taxation and legal considerations.
    • Contingencies and legal risks
    • Key contracts (suppliers and sales)
    • Intellectual property
  • Financial considerations
    • Current financial situation
    • Corporate structure and depth of management
    • Niche markets/market share
    • Growth opportunities
    • Industry context – current and future
  • Retirement considerations
    • What is your desired retirement income?
    • Have you planned for retirement (RRSP, insurance, etc.)?
    • Do you have a will? When was it last updated?
  • A procedure for monitoring the process and dealing with disputes and problems; and a timetable.
    • When would you like to exit your business?
    • How much time do you have to prepare for your exit?

CFIB members can access checklists in the Member Portal to help with their succession planning.

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