There's selling and then there's everything else...

Planning for Success[ion]

There’s selling your business, and then there’s everything else

It’s important to think through the instances beyond retirement that may cause a business owner to leave his or her business:

Divorce;
Death; or
Disability.

While unpleasant to consider, planning for the possibility of each instance is necessary. The last thing anyone wants to see is the hasty sale of a business due to an unplanned for, unforeseen circumstance. The best time to plan for a crisis is before the crisis occurs. An estate plan, a pre-nuptial agreement, a buy-sell agreement – all can contribute to a comprehensive transition plan and provide protection for each “what if” scenario.

…and everyone else…

The starting point in the process is to determine your needs as the owner. What is your expected timeline for exiting the business? What do you need from the business upon retirement? How will the business continue on without you? Our experts are here to help you answers these questions to protect your business and maximize your investment decisions. Discover how here.

Once you have answered these questions, it is then crucial to identify the needs and expectations of other key stakeholders in the business, be they other family members, business partners, or even loyal employees, customers and suppliers.  Family, business, and ownership systems are all equally important to the long term success of the business; all should be given equal respect and consideration.

Considering all the central people close to the business, it’s important to account for all options in succession. A successful transition involves determining all viable alternatives, given the stakeholder requirements. Options can be grouped into three different levels:

1. Legal Options – how will the wealth of the business be transferred? e.g. gift, annuity, buy-sell agreement, partnership, etc.    

2.  Funding Options – how will the transfer be funded? There are many ways to structure a financial transaction: self-funded, insurance, cross purchase, working capital, public offering – viable alternatives will depend on your specific situation.   

3.  Managerial Options - who will ultimately be responsible for leading the business? Will there be more than one leader? How will you transfer your knowledge over to the new leadership? Do you want to be involved with the business after the transfer, or are you willing to walk away?

Selling a business is not an immediate process; it takes time to explore the different options and prepare the business for sale. This is best started well in advance of actual retirement; five years is good, 10 years is even better.  Thinking with the end in mind (i.e. your retirement goal), is the only way to make certain that all decisions made along the way are consistent with the end goal.  Planning early is the best way to ensure a pain-free, smooth transfer, while maximizing your returns.

Stay tuned for new posts in our succession planning series every Thursday. Missed a post? Read on here: 

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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.

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