The most significant change in the life cycle of a business is also an inevitable one: the transfer of ownership. This can involve an inter-generational transfer of a family business, the sale of a business to its management or employees, or a sale to an outside third party. Oftentimes, this transfer is intentional, but sometimes it occurs due to unexpected circumstances, like death or disability.
Succession planning helps ensure the family business and its legacy will live on for another generation. More than 40% of small- and mid-sized enterprises will change ownership in the next five years, yet only 4% of those have a formal plan to manage the transition. When it comes to a family business, transition planning can be a sensitive matter. It’s truly unfortunate when a divisive issue ultimately ends up affecting the current business negatively; but what’s more tragic, disagreements or opposing goals can ruin relationships and destroy family bonds. Proper succession planning through an experienced, objective advisor can help:
- facilitate much needed discussions with each family member;
- navigate sensitivities objectively; and
- eliminate the chance of potential conflicts becoming costly issues.
Whether the end goal involves the sale of a business or transfer to a new generation, it’s imperative to protect yourself, and all that you’ve built. Regardless of how, or to whom the business is transferred, proper steps need to be taken now, to ensure a successful transition when the time comes. There are many implications that can befall a business owner but a solid succession plan will prepare you for a realistic exit and help avoid potential conflicts that could damage your company, your finances and possibly, your family’s well-being. A successful exit plan can take several years to implement, but with the necessary diligence, the resulting value of your business will be well worth the investment, for you, and the next owner. With proper, all-encompassing exit planning, managing the unanswered questions earlier provides for a smoother transition and a happier retirement.
Stay tuned for new posts in our succession planning series every Thursday. Missed a post? Read on here:
Post 1: Planning for success[ion]
Post 2: There's selling and then there's everything else...
Post 3: Keeping it all in the family ...or branching out from the family tree
Post 4: When 'What If' Becomes 'What Now?'
Post 5: Should I stay or should I go?
Post 6: Beware of the tax man
Post 7: Freezing value = saving long-term
Post 8: What it's worth now, and how
Post 9: There's value and then there's worth
Post 10: Visualize, then plan
Post 11: The key is transparency
Post 12: Keeping up with the paperwork
Post 13: Consider all options
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About Richter : Founded in Montreal in 1926, Richter is a licensed public accounting firm that provides assurance, tax and wealth management services, as well as financial advisory services in the areas of organizational restructuring and insolvency, business valuation, corporate finance, litigation support, and forensic accounting. Our commitment to excellence, our in-depth understanding of financial issues and our practical problem-solving methods have positioned us as one of the most important independent accounting, organizational advisory and consulting firms in the country. Richter has offices in both Toronto and Montreal. Follow us on LinkedIn, Facebook, and Twitter.