All too often, business owners neglect to plan ahead for the succession of their business. While lack of planning is likely to affect how an owner transitions out of her or his business, there can also be severe implications that could impact the ‘when’, ‘what’, ‘who’ and ‘why’ aspects as well.
As a business owner, you have worked long and hard to build up a valuable asset and at some point down the road you will likely want to enjoy the fruits of your labour and retire. Between now and then, however, there are a number of questions that need to be answered:
- When do you want to retire?
- How are you going to retire?
- How much will you need in order to retire?
- Who will run the business if you are unexpectedly injured and no longer able to work between now and your expected retirement date?
- Are you going to sell your business, pass it along to another generation or just close the doors and walk away?
It is human nature to generally fear the unknown, which means that issues and questions like these are often brushed aside, with the intention of dealing with them “later”. Addressing your own succession involves answering a lot of difficult questions for you, the many other people involved with the business, and your family. Besides, your time is much better spent managing the day to day operations of the company, right?
Wrong! The old cliché is very true in this case – we are often ‘our own worst enemies.’ A lack of preparedness for the transition of your business can ultimately harm the company and lead to family conflict and discord. That’s why it is so important to find the options that best meet the needs of all involved parties. A good succession plan should summarize the decisions made and the rationale behind each decision. It should also clearly communicate everyone’s role going forward. A written succession plan acts as a road map and a contract to ensure everyone involved supports and is accountable to the plan.
A word of caution: the succession plan is not a static document; many of the assumptions used in the planning process may change over time. However, addressing the hard questions early on means tough conversations down the road can be handled more easily. The succession planning document should be reviewed and updated periodically to ensure that it remains in line with your objectives.
Due to the emotional component involved and the in-depth knowledge required of legal, tax, and financial issues, succession planning can be a very complicated process. Working with experienced and independent professional advisors can help accelerate the process and ensure that thoughtful deliberation is given to all issues.
In this series, Richter’s team of experts will lead you through the many considerations that you as a business owner must take under advisement, in order to transition your business successfully.
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.