When is the Right Time for Business Succession?

Transitioning a business can be an emotional period of your life as an entrepreneur. True leaders, however, embrace the fact that businesses need succession plans and that sometimes these businesses can even outgrow the skills of the founder. Knowing when to let go is probably the hardest business decision you will make as a business but your trusted tax and financial advisors can help.

It’s a complex topic that’s been tackled in a new ground-breaking book, Defusing the Family Business Time Bomb, by business educators Jenifer Bartman and Evelyn Jacks. 

It’s such an important one that the authors have chosen as their subtitle this dramatic statement: take control of the most explosive challenge in a generation.  When and how you approach this decision will determine whether your company will survive or thrive and it will also determine whether or not your transition plan is tax-efficient.

It all depends on the family’s ability to build a company that is scalable and has value beyond the owner’s lifetime, while focusing on the health of family relationships along the way. In addition, there is much planning to do to ensure that the equity in the business is properly positioned to drive a tax-efficient retirement income and a disposition that can maximize provisions like the $866,912 Capital Gains Exemption for small business corporation owners or a million for qualifying farmers and fishers.

Your tax and financial advisors can help you start thinking about whether it’s the right time for you to move on as a key leader in your business. Here are some important questions to consider from a personal lifestyle point of view:

  • Do I need my business or does my business need me?
  • Do I still feel energized and excited about what I am doing and building?
  • Does my business still need me in order to grow? What do I need from it?
  • Am I still adding significant value to the business in terms of leadership direction and strategic decision making?
  • Is this what I really want to be doing right now?
  • Is my business having a positive or negative impact on my family life?
  • Are there other ownership options for my business to allow it to grow to its fullest potential?

But from a tax point of view, do ask what the proper planning process entails – and its best timelines – to take advantage of all your tax savings opportunities.

Once you have answered these key questions, you will be much more prepared to build your succession plan, including critical timeframes to make it happen. Following these simple steps will also make it easier for you to see your way to the future:

  1. Establish clear but flexible timelines.  Do this in conjunction with your financial advisory team.
  2. Set key milestones for achieving goals and objectives toward your vision.
  3. Keep your succession plan up to date to reflect any changes or decisions.
  4. Review and modify your plan at least once a year as things can change quickly in the business world.

Additional educational resources: For more information, order your copy of Defusing the Family Business Time Bomb. Advisors and business owners may also wish to take two relevant and very valuable certificate tax courses from Knowledge Bureau: Business Valuation for Advisors, and Fundamentals of Succession Planning.



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