If you’re a small business owner and you haven’t made a succession plan, now is an excellent time to start. You can help your business change ownership smoothly with careful succession planning.
Taking the steps today to make a succession plan can help ensure your business keeps running smoothly.
An ownership change is one of the most important moments in your life as an entrepreneur. When the time comes, handing over the company with a careful exit strategy can help you keep the value of your business – and your legacy.1
Why does planning matter?
A good plan lets you keep positive connections with employees and business partners, which may be especially important if those relationships are with the family.2 You should also make sure your Business is solid and has good prospects to get the sale price you want.3
Succession planning helps you:
- Protect the legacy of your Business
- Maintain a service for your community
- Build value for your Business
- Provide financial security for your family and stakeholdersDeal with unexpected events (illness, accident, or death)
Prepare for the future
A leadership change can also be challenging for employees, suppliers, and customers. Make sure your strategy includes a communications plan for your business partners and team members to help keep everyone informed during the transition. It’s also important to keep your Business running smoothly.
When should you start?
How about today? Today’s a good day to start planning if you expect to leave your Business within the next five years.
Even if your Business is new, having a plan in place helps ensure you’re prepared for the unexpected . According to experts, transitions can take up to five years to complete and, in the case of a family business, as many as 10 depending on the organization’s size or how complicated it is.
With family businesses, relationships and emotions can make things more complicated. This is because most people aren’t that comfortable talking about aging, death, and finances. According to Susan Ward, a Canadian business writer and experienced business owner, 70% of businesses don’t survive the transition from founder to second generation.4 “In most cases, the ‘killer’ is taxes or family discord – both issues that a good family business succession plan will cover.”5
Who’s best to replace you – and when?
Whether you want to pass your Business to a family member, an employee or an outsider, you’ll need to consider the skills and qualifications to run the Business, which can take years. Once you’ve chosen your successor, a transition plan will address the training they need.
Who do you need to support you?
You don’t have to do it alone. Experts are available to help with succession planning. The use of professionals is important to a small business’s success, including its transfer to another owner. They can provide knowledge and expertise in areas where you may have little experience. They can also round out your management team to ensure your Business is working effectively.
As an entrepreneur, there are four types of professionals to talk to:
Accountant
Lawyer
Banker
Advisor
What’s your exit plan?
Your choice of successor, your business structure, and working with the professionals listed above will help you work through your transfer. How you transfer your Business – to a family member or through a cash or financing sale, for example – will help you determine the timeline for exiting the Business.6 And, with all the helpful resources available – many of them free – there’s no time like today to plan for the future
1 “Business transition planning – Opens in a new window
” Free eBook available from BDC.
2 “Succession planning – Opens in a new window
” Innovation, Science and Economic Development Canada. Nov. 14, 2017.
3 Ibid
4 “Microsoft, Apple, Jay Leno…they all needed a succession plan and so do you – Opens in a new window
” FORBES. Feb. 9, 2014.
5 “Tips for Successful Family Business Succession Planning. – Opens in a new window
” The balance. Sept. 28, 2016.
6 “How to Transfer Business Ownership: What You Need to Know – Opens in a new window
” Value Penguin. 2018.
Easy Business ideas provided by Canada Life