Succession Planning Process

How to plan and enact a successful transition.

Leaving business succession to chance could allow someone else to decide what happens to your business, and potentially at significant cost.

Planning early helps reduce the tax impact of ownership changes, as well as ensure a smooth and successful transition of the business to the new owner or owners. A successful plan will also help enhance the overall value of your business today.

The process of planning and enacting a successful transition consists of several steps, including:

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Identify and Review Priorities

The first step in the process starts with identifying your priorities. Business owners should ask themselves, "What do I want for my future, my family, and my business?"

Important steps to consider include:

  • When to exit the business
  • Minimization of taxes
  • Retention of key staff and customers
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Identify a Buyer or Successor

Who will run the business when you are no longer running it?

Your options for exiting your business are as follows:

  • Passing the business to family
  • Transferring ownership through a management buy-out or employee buy-in
  • Selling the business to a third party
  • Winding up the business
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Develop a Succession Plan

Given that your succession plan will be built around the unique characteristics of both your family and your business, every succession plan will be different.

However, there are several common elements to most succession plans, including:

  • Statement of distribution of ownership: how much to sell and when
  • Business valuation and mechanics of purchase or sale
  • Taxation and legal considerations
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Integrate with Personal Financial Planning

Ensure that your personal retirement and estate goals are integrated with your overall financial plan.

Since your investment in your business is probably your most significant asset, there are a number of important personal and estate planning issues that should be addressed in conjunction with your professional advisors, including:

  • Freezing the Value of Your Shares or Estate
  • Insurance
  • Retirement Planning
  • Preserving Your Estate
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Monitor Plan Implementation

It is important to monitor and review your plan during the implementation period to ensure that you are on track in terms of timing and deliverables.

Your business succession plan should also be reviewed on a regular basis – at least annually – and whenever there is a major event such as a birth, marriage, illness or death, family member entering the business or even a relevant change in tax legislation.


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