SB Partners

Succession Planning

Integrated succession planning: a critical exercise for small business owners

Whether or not it’s a family-owned business, succession planning needs to start three to five years early and should be based on professional advice.

Succession planning is critical for the traditional family-owned business as the next generation moves up. Other small to medium enterprises (SMEs) where there are no next generation issues, also require the same careful planning; owners must plan the transition to retirement or another career.

Failure to plan usually results in less than desirable results!

Whatever your circumstances, SB Partners has the experience, expertise – and the empathy – to help you craft and implement a plan that’s right for you.

Start planning early - CFIB

In a June, 2005 member survey, the Canadian Federation of Independent Business (CFIB) concluded that business owners should start planning early for succession and employ professional advice. For family owned businesses, CFIB strongly recommended involving the future successor early to maintain stability in the firm. Other survey results include:

  • Only a third of businesses have a succession plan, most of which are unwritten and informal
  • Those with a plan don’t adequately address soft issues like training successors
  • Some 41 per cent of SME-owners want to exit their business within the next five years; (that’s the same time frame as one car lease)
  • Retirement is the number one reason – 82 per cent – for owners planning to exit their businesses

Succession planning pays off

Since retirement is the number one reason for exiting a business, wise entrepreneurs plan their financial needs well in advance. With professional advice – starting three to five years before retirement – you can maximize:

  • Personal savings and assets
  • The capital gains exemption and…
  • Proceeds from the sale of the business

Succession planning – it’s not just about the owner

At SB Partners, we know developing a plan often requires advice from various professionals such as accountants and lawyers. We also know the business’s internal stakeholders – key managers, employees, family members and the successor(s) – need to be involved.

The CFIB study noted only 16 per cent of small business owners sought input from their successors in developing a succession plan. Those employing family are only slightly more likely (18 per cent) to seek input from successors than those who don’t (11 per cent).

We know such input helps minimize conflict among these stakeholders and helps maintain stability throughout the transition.

Technical and “soft” issues need to be planned

If asked what needs to be planned, most owners cite technical issues:

  • Legal transfer of the business ownership
  • Tax implications
  • Financing of the successor
  • Dividing future profits after the transition.

Few, however, mention “soft” issues such as:

  • Identifying long-term personal and family goals
  • Communicating stakeholders’ vision for the business (employees, family and successor) and their anticipated role after succession
  • Identifying processes to select and train a successor

The SB Partners approach ensures you start planning– well in advance – and that financial and legal bases are touched, the right stakeholders involved and when appropriate, successor training arranged. The process involves our own internal financial team plus others like lawyers and professionals who specialize in team-building over difficult transitions.

The bottom line? The better prepared you are, the more control you have to achieve a smooth and financially rewarding transition.

The SB Partners process

We start with a full diagnostic of your situation. The goal: when you’re ready to make the transition, let it be on your terms and not somebody else’s. Our team deals with soft issues like the firm’s core values and your personal goals (whether you have enough to retire or whether you see a role in the business following the exit). Naturally, we also deal with valuation principles, tax planning and will and estate planning.

From this exercise emerges a succession plan – one that is technically sound, involves all the right stakeholders and encompasses as many of your personal goals as possible.

Contact

Elaine Holding, Ec.D.
Director of Client Services and Business Development
Tel:  (905) 633-6354
Toll Free:  1-866-823-9990 ext 6354

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What our Clients Say

Joanne Pellegrino, Accountant, Izumi Outdoors Inc.

"In the three years that Ive been dealing with SB Partners I have always found them to be courteous, thorough and professional. Their work on our annual statements and tax returns is exceptional and their expertise makes my job a whole lot easier."