Why you need to plan early for business succession
Lack of planning can mean big problems when it comes time to hand off your business to someone else.
Succession planning is an often overlooked – though extremely important – aspect of most business plans. Barely a third of Canadian business owners have a formalized succession plan. This can mean big problems when it comes time to hand off your business to someone else.
As an entrepreneur, your business is an important part of your life. After all, it’s something that you’ve spent years carefully building. It should be no surprise, then, that 39% of Canadian small business owners plan on working into their seventies.
It can be hard to separate thinking about your business and your personal finances, but failing to plan for life after work can leave you woefully unprepared. By starting succession planning early, you can ensure that when you decide to slow down you’re ready to hand over the reins with minimal stress, fear or panic. You also don’t want to feel rushed to sell before you can be sure that you’ll receive an adequate return.
Regardless of whether you aim to sell your business or hand it off to a family member or employee, it can take a while to find or train a proper successor. If you’re going to sell your business, your industry should give you an idea of the number of potential buyers. However, even if you have a large number of suitors, it can require a sizeable amount of time and effort to choose the right one.
Passing your business to a family member has its own unique set of complications. Even if your eventual successor has been working in the business for years, there’s still an adjustment period as they ease into the ownership role, and it’s likely that the transition will go much smoother if you begin the process years before you hand over the keys.
Sorting out your personal finances and finding a successor are only two of the elements in a succession plan. You should also be considering business valuation, the role of key employees, and tax and legal concerns. The whole thing can be quite complicated, so it’s advisable to begin the process early and get help if you need it. You want to be sure your plan is properly tailored to your business – and to your eventual retirement.