Planning for succession can be invigorating, especially when your business is doing well. Dreaming of seeing it grow while in retirement can give you immense satisfaction. However, when things are not going so well, dealing with day-to-day problems can overwhelm you and leave little time to plan.
As one person said, don’t let the urgent throw out the important. Many of the hassles that demand your immediate attention are not so important in the long run. Take some time to plan. Ask where you would like to see your business in one, two or five years. You may want to sell to others or see a family member take over. You may have no relative who is interested but have employees who would jump at the chance to own their own a business. Take the time to think about it.
Here are nine things to ponder:
- Explore your options: whether to sell to family, employees or a third party.
- Keep the business in the family: speak to an accountant who knows the rules of passing your business to a family member.
- Select and prepare a successor: if you agree to stay on a year or two, a buyer might pay more to capture your expertise and help in the transition.
- Plan a management buy-out: consider majority ownership and structural decisions.
- Determine the value of the business: get a third-party evaluation to determine fair market value.
- Sell the business: will you sell shares, assets or a combination of both? All at once or over time?
- Finance the succession plan: consult with your lawyer and/or accountant on your options.
- Understand the tax and legal issues: remember farms are treated differently than retail; families are treated differently than strangers, etc.
- Managing wealth to secure your future: what will help you sleep well at night?
The overriding theme is to begin the process as soon as possible, if you haven’t already. If done properly, succession planning is not a one-time exercise, but an ongoing process that you regularly update and amend as circumstances change.
Finally, never forget that CFIB is here to help you. We have a succession planning guide, and you can always call our Counsellors for more information. Happy planning!