Succession Planning for Your Business
I’ve Created a Great Business—Now What?
It is a critical part of running a business, but one that too few business owners do—succession planning.
When the current owner retires or something happens that makes the current owner unable to continue running the business, it is essential that there is a plan to continue operating or sell the business.
How Do I Get Started?
Your first step is an exit strategy—what do you want to have happen? Do you want to sell your business to a manager or your employees? Do you want to sell it to an outside party? Do you want to transfer it to interested family members?
Once you know where you want to go, your professional team (including your accountant) can help make it happen.
When Should I Do This?
The time to start planning is now; succession or sale planning for a business can be a lengthy process, and it is best not done at the last moment.
If you decide to sell your business, prospective buyers will want to see at least two years of financials (more is better). If employees or managers want to buy your business, they will probably need to get financing in place, which can involve term life insurance policies.
Who Will You Need on Your Team?
Succession planning is likely to involve at least four advisors—your accountant, your lawyer, your banker, and your insurance broker. Your accountant will be critical in getting and keeping your finances in order. Your accountant will also be crucial in advising you of tax strategies for the path you decide to take with your business.
As noted in this article from CPA Canada,
“Succession planning is a multi-disciplinary planning process and key advisors such as a CPA and lawyer should make up your advisory board. A CPA can add value when it comes to the financial plan, determining the tax implications of the business transition and helping to advise on strategies to reduce or eliminate estate and income taxes.
“The planning process may also reveal that selling the business—rather than maintaining a successive ownership—is the best option for your business.
“In such a case, proper accounting records are essential to meet the demands of future buyers and investors. A clean and audited balance sheet, reviewed and audited by an independent CPA firm, in addition to other financial statements, will be a minimum requirement.”
For a little more detail, here is a video from Main Street Financial Solutions.
Contact Shaw & Associates Chartered Accountants for accounting help you can count on. One complimentary meeting with us will put you and your business on a more profitable and positive path.