Blueprint
Business owners can expect bad outcomes without
a solid succession plan

Business owners don’t live forever. Nor do they run their businesses forever. So it must be important to have a succession plan in place so an orderly and successful transition occurs when ownership of a business passes from one person to another.

However, a recent survey by Canadian Capital Magazine found that isn’t the case. While 94 per cent of business owners who responded to the survey felt it was important to have a succession plan, only 38 per cent said they had one in place.

Devin Harris, director of the Investors Group’s Moncton region office, has seen it happen before. A business owner rolls out of bed one Monday morning and decides he or she is going to sell their business. Usually, it doesn’t turn out so well. “It’s very scrambled and most times the full value of the business isn’t realized,” Harris says.

So what can business owners in Atlantic Canada do to ensure they develop a succession plan that results in the best outcome for everyone involved — the buyer, the seller and the employees? What follows are three pieces of advice from Harris.

Develop not one, but two, plans: The first is in the case of a controlled transition, where a succession occurs on the owner’s terms and not because of health or financial reasons. The second plan lays out what will happen if an owner must leave the business due to unforeseen circumstances. “Owners need two plans,” Harris says. “And if these are put in place as soon as possible, owners will sleep easier at night.”

Identify the potential successor(s) early: Because Atlantic Canada has a high percentage of family and owner-managed businesses, they are seldom sold to strangers. That means succession will come from within the company or the family. Harris says the sooner a successor is identified and groomed to take over the business, the better. “From day one the plan is to find those one or two key individuals to take over and help them with their growth,” Harris says.

Stick around after the sale: Particularly for small, family-owned businesses, it’s a good idea for the previous owner to establish a period (one month, one year or more) where he or she is still involved in the operation to some degree. “This is to ensure the transition goes smoothly and is done in the best interests of the company and the employees that have helped grow that company,” Harris says.