This is the first of a two-part analysis – based on insight drawn from the research files of Scotia Wealth Management – about the complexities of business succession and sale, an all-too-frequently overlooked issue for the small business entrepreneur.
A business often represents a lifetime of work. Despite almost three-quarters of business owners wanting to transfer control or exit ownership within the next decade, barely a third has a formal succession plan in place. Lack of a plan is a common reason family businesses fail to survive first-to second generation ownership.
Leaving business succession to chance could allow someone else to decide what happens to your business, potentially at significant cost. Planning early may help ensure a smooth and successful transition of the business to the new owner or owners, as well as reduce the tax impact of ownership changes. A successful plan may also help enhance the overall value of your business today.
The succession & sale planning process
The process of planning and enacting a successful transition consists of several steps, each of which is equally important. These steps include:
- Identify and review priorities
The first step of the process starts with identifying your priorities. Business owners should ask themselves, “What do I want for my future, my family, and my business?”
- Identify a buyer or successor
Who will run the business when you are no longer doing so?
- Develop a succession plan
Since a variety of expertise is needed, it is important that you work with an appropriate team of experts to help you develop your business succession plan. Such experts typically include a wealth advisor, an accountant and a lawyer.
- Integrate the plan with personal financial planning
Ensure that your personal retirement and estate goals are integrated with your overall financial plan.
- Monitor plan implementation
It is important to monitor and review your plan during the implementation period to ensure that you are on track in terms of timing and deliverables.
A significant asset in your estate
According to U.S. based business succession experts Baldwin, Haspel, Burke & Mayer LLC: ‘the closely-held, family business often is the most significant asset of the business owner’s estate.’
Whether your company is middle-aged or mature, we can help you put a tax-efficient plan in place that will enable you to deploy your company’s surplus assets and excess cash to the best possible long-term advantage – for yourself and your dependents.
In the second part of this blog (Part 2: The elements of a plan) we will take you through a 10-point checklist to follow when developing your succession plan. Above all, it’s important to assemble the right team of professionals, as we noted a wealth advisor, an accountant and a lawyer. We have no wish to be alarmist, but:
Whatever you do, don’t go it alone.