Pawns moving forward as indicated by arrows

What is succession planning?

What is succession planning?

Synopsis
3 Minute Read

Prepare to exit your business on your terms with a thoughtful success plan. Whether you’re thinking of retiring, passing the business to family, or selling to a third party, it’s important to know and carefully consider your options for the future of your business.

National Leader, Succession Services

Whatever the size of your business, having an exit plan will help you feel secure in your present and confident in your future.

When it comes to thinking about retiring and restructuring, selling your business, or passing it on to family, planning for succession can seem like a daunting task.

Building the right strategy requires thoughtful examination of your business and clear goal setting. But it’s a marathon, not a sprint. Taking the time to carefully plan for succession, whatever that looks like for your business, will give you peace of mind and control over the process.

What is succession?

The process of succession will look different for every business. Depending on size, structure, and timing, succession and everything that comes with it involves exploring and understanding your organization from both a granular and broad perspective.

Ultimately, succession planning is the process of developing a roadmap to selling or transitioning out of a business. This is done when passing on the business to family, selling to a third party or employees, or retiring and restructuring the organization.

As business owners do, you’ve spent a lot of time building, nurturing, and growing your business, so having a plan in place to ensure a smooth and thoughtful exit is worth its weight in gold.

What should a succession plan include?

When it comes to succession planning, there are a few things to consider right off the bat:

  • When do you want to fully leave the business? Some buyers may require the seller to stay on for a transition period so keep that in mind when discussing options.
  • Does it matter whether you transition to a family member or current employee? Or do you just want to sell it, regardless of who it is to?
  • What does the current leadership structure in your organization look like? Can the company run successfully without you there?
  • What do you want to do in retirement? Will you have enough funds for your plan?
  • What is your tax strategy? Is it optimized for a business exit?

No two succession plans are alike and there is no one-size-fits-all solution to the complexities of your unique situation. By determining what your goals are ahead of time, you’ll be better equipped to face any challenges that may arise.

What are the benefits of succession planning?

In the same way that a will helps determine how you want your estate to be divided, a succession plan gives you the control to oversee, and aid in, the process of exiting your business on your terms.

We all have insurance to protect our homes and cars, but many business owners underestimate the value of a succession plan. Regardless of your age or stage in life, and business ownership, having a plan eliminates the worry of what happens next – consider a succession plan like insurance for your business.

A few key benefits to succession planning include:

  • A business that plans for succession will be in a better position to sell. Creating a well-organized plan shows prospective buyers that the business is well-run and can operate successfully without the owner.
  • Addressing the corporate ownership structure ahead of time can help minimize taxes on the sale, mitigate any surprises, and reduce some of the challenges upon sale.
  • Creating a long-term plan and thinking about retirement costs will make you more confident in your future.
  • A succession plan is also an emergency plan. If your health declines or another emergency occurs, you can always accelerate the plan instead of trying to build one from the ground up.
  • Succession planning is just another step in your journey to grow and safeguard your company. Not only will you be able to see what might require innovation or change, but you’ll also be protecting the brand and inherent value you’ve built.
  • If passing the business to family or an employee, you’ll be setting them up for success. By including them in the succession planning process, you’ll be able to work together towards mutually beneficial outcomes.

What’s the next step?

Succession planning is an emotional journey; one that involves thoughtful consideration and an open mind. It’s a big job but it’s a critical step in the business ownership journey.

You will only exit your business once – let’s make sure it’s done right and you’re happy with the outcome. Working with experienced advisors to plan for succession will give you the comfort of knowing that you’re getting the most out of what you’ve built and that you have someone to answer all of your questions along the way.

Contact us

To find out what path to succession is the best fit for you, contact MNP National Leader of Succession, Shane King.

Insights

  • Progress

    February 20, 2024

    Case Study: Things to consider when adding a child as a joint owner of a property

    A new requirement to file annual tax returns with the CRA for bare trusts has parents reconsidering whether to add a child to title of their property. This case study illustrates the pros and cons of joint tenancy with a child.

  • Agility

    February 16, 2024

    Exploring the landscape: The pros and cons of alternative financing sources for your business

    Alternative financing opportunities can provide significant benefits for Canadian business owners, but they’re not without their risks. Whether you’re looking for flexibility in repayment or to diversify your funding sources, there are several options available to help meet your unique needs.

  • Progress

    September 06, 2022

    New Trust Reporting Rules – Are You Ready?

    Find out more about proposed new federal trust reporting rules which would increase disclosure requirements, and what you can do to prepare for them.