Succession Business Planning
What You Really Need to Know Now
By Joe A. Salib
This is the first in a series of articles concerning business succession planning and related subjects. It is meant to guide business owners through the process of maximizing their personal financial security upon the transfer of business ownership.
This series of articles is designed to give you a better understanding of the business succession planning process. It can help you determine:
• the steps needed to arrive at a workable succession plan
• the type of advisory team you’ll need to build a succession
plan
• the pros and cons of family succession
• the role your business might play in funding your retirement
• insuring tax smart planning
• the best way to help ensure the financial security of both
you and your business if unforeseen events such as disability
or death occur.
What is business succession planning?
Business succession planning is the process of determining how you want to transfer your business ownership and how you will transition out of a business management role, at the same time maximizing your personal financial position.
Why advance planning?
There are several reasons that may apply to you.
• A poor management transition can have a negative impact on the business. It can lower its value or even result in business failure.
• If you’re like most entrepreneurs, the value of your business
will represent a substantial source of income in retirement.
A proper succession plan can help manage the risk to your
retirement capital as you approach retirement.
• If you are planning to keep the business in the family, you will likely need to co-ordinate your business succession plan with your estate plan. You may want to consider opportunities for tax deferral that would benefit you and other family members.
• An unforeseen event – such as the death or disability of you
or a business partner – could lead to business hardship without proper planning. Advance planning can help ensure that you, your family and your business are all properly protected through good times and bad.
When to start planning?
It’s never too early to start planning for business succession. You have the vision where your business is going. You have personal goals you want to achieve. The few early steps you take – no matter how small they might be – should be in the right direction.
Let’s say you are in the early stages of the business cycle, during its survival stage. Your current priority might be risk management, your children’s education, or paying down debts. You may not think about succession for many years. Yet, you can put in place the fundamental tools and corporate structures that will be beneficial when your business transitions to the growth stage and into maturity.
In the early and growth stages of the business cycle, when dealing with risk management and corporate structures, you set up the plans you currently need. It is prudent, however, to make these same plans flexible enough to meet your future requirements when business succession and estate planning become priorities. The big picture approach with long-term planning will help you protect the value of your business and ensure your financial well-being well into the future.
Next article: Business succession planning as part of financial security
Joe A. Salib, a Certified Financial Planner with Sun Life Financial, is active in investments and insurance strategies for individuals, business owners and professionals.
Tel: 416-407-0748; email: joe.salib@sunlife.com
2600 John Street, Unit 207, Markham, ON L3R 3W3 T: 905.475.5222 F: 905.475.6369
