This feature article has been submitted by MNP, Business Advice Centre:
When you build a business from the ground up, it becomes your baby. The long hours, hard work and sacrifice are investments made worthwhile when you watch your enterprise grow.
So why do half of small to medium-sized businesses in Canada have no formal, written succession plans for their planned exit? Succession planning takes time and without a plan, your legacy could turn to dust.
Here are some tips to help maintain your legacy, maximize the return from your exit, and do it on your terms.
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Start early
A succession plan is not a one-off event that you complete, put on the shelf and forget. It’s an ongoing process that needs to be reviewed regularly. By starting early in the process, you ensure your business is ready for transition if and when an expected or unexpected event arises.
Strategic planning
A succession plan is part of your strategic plan for your business. It can help you identify key employees, talent gaps, and enable you to focus training for staff and move your organization forward.
Open communication
The planning process should not only help identify your personal vision for the business, but ensure everyone understands it and is aligned with it, making for a smooth transition.
Corporate governance
When unexpected events occur such as a death or illness, succession planning can ease the stress of an already difficult situation. If successors have been identified and emergency planning is in place the business doesn’t have to suffer.
Contingency planning
Make sure you have plans B and C. Tragedies happen; an heir might pass away before you, leaving a void just as you were planning to exit. A succession plan that addresses the unthinkable will help your family through a difficult time.
Transfer of wealth
Whether you plan on selling or handing the business over to heirs you will want to properly plan a tax strategy for your exit that minimizes your taxes. Working with a tax specialist early on will help you achieve your tax objectives in your succession plan.
Safety net
Done right, a succession plan is an invaluable safety net that will generate more value in your business and allow you a planned, confident exit. Be proactive, not reactive.
For more information, contact David MacAlpine, CPA, CA, at 289.293.2323 or david.macalpine@mnp.ca. David is a partner in Private Enterprise services at MNP, a leading Canadian accounting, tax, and business consulting firm.
