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Preparing For Succession


Just as the success of any business is a function of the quality and quantity of preparation and training that go into starting it, the same applies to succession. Successful transitions are the product of thoughtful preparation towards the fulfillment of personal ambitions and financial goals.

Planning ahead is a critical step in laying out a path so that retirement turns out the way envisioned. A short term plan can span anywhere from one to five years. One should not wait for a ‘trigger’ event such as illness, divorce or death to force last minute decisions.

Although unique to every business, the most effective succession plans have these common elements:

  1. Strategic

    A comprehensive succession plan involves what an entrepreneur wants his business to look like once he is gone. Future income needs, legacy, level of involvement in the business, family needs and expectations, management and key employee needs and expectations, are all important considerations.

    Common Goals and the Related Considerations

    ​ Possible exit strategies may involve a sale to other shareholders, a sale to management, a sale to a competitor or other 3rd parties, a sale to private equity, a transition to family members or going public.

    Each alternative has its own complexities and issues. On a transition to family members, how to equalize an estate when not all the children are in the business may be an issue. , in additionF further training and mentorship may also be needed. In the case of a management buyout, the development of a new compensation structure that will stimulate greater management involvement in the long term success of the business may warrant consideration. Where a sale to 3rd parties is the goal, a specialist may be required to help objectively determine the current value of the business, as well as to determine what has to be done to maximize the value of the business. Income tax considerations are always an issue for review.

  2. Realistic

    Professional advisors can help turn an entrepreneur’s vision and abstract goals into a viable succession plan. An advisor will help explore all options, as well as assist in defining and prioritizing personal and business goals to ensure that they are achieved in the most efficient way possible.

  3. Integrated

    ​ Remember, a succession plan takes between one to five years to implement, and requires the expertise of the entire advisory team ​(financial, legal, tax, valuators) to ensure every aspect of an entrepreneur’s future and that of their business have been accounted for.

This article was originally published in French on​

To start building your succession plan, contact Nathan Bratt, CPA, CA, Business Advisor, Tax, at 514.861.9724 or [email protected], or your local MNP Business Advisor.