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When I began my career here nearly 30 years ago, many of our clients, like me, were in start-up mode. Over the years I’ve watched industry, legislative and economic changes impact their businesses and ours – sometimes quite profoundly. I have had the privilege of watching many of our clients proudly welcome their children into the businesses they worked so long and hard to build. In addition, I’ve come to understand how life changing events such as critical illness or disability, untimely death, divorce, remarriage and second families can change the dynamic of an entrepreneurial business.
Planning for both the inevitable and the unthinkable is the key to the survival of any business. The unthinkable or unplanned can be addressed by undertaking contingency or emergency preparedness planning to identify those critical elements of the business which could immediately lead to a significant loss of enterprise value.
Beyond the unplanned events, all business owners need to be consciously planning for their exit. The three most common exit strategies involve:
According to the survey of a major Canadian bank, however, while half (550,000) of all small- and medium-sized Canadian business owners are poised to retire by 2022, only 40% of those aged 55 to 64 have a formalized plan that will allow them to successfully exit their businesses.
Given the unprecedented magnitude of this exodus, a “…faulty or badly executed succession planning process could have a ripple effect throughout the Canadian economy via reduced productivity, job losses, premature sales and increased bankruptcy rates”.
It is important for business owners who envision their business exit in a carefree and financially secure manner to understand that the requisite planning is a process which, if properly undertaken, requires time – typically years, not months.
Time is needed to collect and analyze inputs of various types, both personal and business, and to conduct meetings with the different stakeholders in order to create a comprehensive action plan. Time is needed to build and maximize the value of the business so that the owner may fully realize that value upon exit. Time is required to ensure tax minimization strategies are effectively in place. And time is especially needed to ensure all family members and key employees are ready, committed and aligned with the business owner’s strategies.
While our approach, ExitSMART™, is a comprehensive process, it begins quite simply with us asking the business owner, “Where are you at and where do you want to go?” The process itself is rolled out in manageable stages which are detailed and coordinated with the business owner.
Our role is that of a quarterback, one who works with the client – from beginning to end – to coordinate the work of other advisors, bring reliable information and options to the table, and ensure that nothing is missed that could cause problems in the years to come. We help the business owner understand how to identify issues, needs and opportunities and to assess the optimal strategies. We also assist our client in formalizing an action plan to move them from where they are to their desired result, and then to implement the plan in conjunction with their team of professional advisors. The business owner remains in control throughout the process and makes all decisions.
As a business owner, you must strategically plan for exit from your business at an early stage. A casual conversation with your advisor at MNP about ExitSMART™ may provide both the initiative and the understanding you require to move forward.
For more information about exiting your business, contact Jim Chagnon, CPA, CA, TEP at
[email protected] or 289.293.2311.
Suite 2000, 330 5th Ave. S.W.
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