It's no secret that building a successful food or beverage
business requires persistence, dedication and personal sacrifices.
As a business owner, you will likely want to reap the benefits of
your hard work by retiring at some point in the future. But how do
you ensure that the business will thrive once you leave? And how do
you maintain the legacy of your business and protect the future for
both your family and employees?
A succession plan enables you to identify and develop top talent
to assume senior positions, with a long term objective of
eventually running your company. It's a tool to protect all
your hard work and sacrifices, while maximizing your proceeds in
the event of retirement, illness, disability or death. If you plan
well, you'll rest easy at night knowing that the business will
continue to thrive beyond your departure.
While most business leaders understand the importance of
succession planning, they can fall victim to human nature and fail
to devote the time and resources to make it happen, instead, giving
priority to other, more seemingly urgent priorities. As a result,
they place the business at risk by not having a strong team in
place who can step in, when required, to assume corporate
leadership. It is far better to make proactive decisions than to
scramble last-minute for situations that should have been planned
well in advance.
Part of the problem is that many owners feel overwhelmed with
the sheer scope of the task, and uneasy with the idea of extracting
themselves from a business they've worked so long and hard to
build. At Fuller Landau, we share our vast experience to work
closely with you and your family in developing a comprehensive and
effective succession plan to help you transition out of the
business, while maximizing your proceeds.
Below are five key considerations to take into account when
embarking on this critical process:
1. Outline Your Objectives for Your Succession Plan
Do you want a complete exit from the business without any
continuing day-to-day responsibilities? Or would you prefer to
transition your involvement over a period of time? This decision
will impact the timeframe for the plan and how you execute it.
2. Determine What Your Business is Worth
A Chartered Business Valuator (CBV) will help you determine the
fair market value of your business and give you a benchmark of what
your business is worth. They can also help you maximize the value
of your business by increasing sales, reducing costs, and ensuring
the balance sheet is optimized for the eventual sale.
3. Identify Likely Successors
Family members, employees, and external third parties are all
possible successors of your business. Special attention should be
given to situations where some, but not all, of your children are
identified as the likely successors. There is an increased risk of
failure for succession plans when injustices, whether actual or
perceived, arise from the transition of a business to one child and
not another. Carefully consider the emotional consequences of these
decisions as they can affect how smoothly the transition occurs. In
the event that you decide your business is better suited for a sale
to a third party, create a list of possible purchasers who may wish
to acquire your company. Be sure to include any competitors on this
list who may be willing to pay a premium to acquire your
company's assets and, in particular, your customers.
4. Understand the Legal and Tax Implications of Your Plan
It is important to seek the assistance of tax and legal
professionals in order to ensure your tax bill is minimized on the
disposition of a major asset, and that no unforeseen legal
complications arise when you want to end your involvement with the
business. This is a crucial part of the succession planning
process. If you overlook this consideration, you may be leaving a
lot on the table.
5. Do Not Delay
It is highly advisable to start planning early, as a thorough
and effective business succession plan usually takes a few years to
implement. In our experience, five years is good – ten is
The key objective in an effective succession plan is to ensure
the smooth transition of your business. In order to maximize the
value of your company, focus on how your departure will impact
relationships with your family, your customers, suppliers and
employees, and leave the valuation and tax planning issues that are
integral to a succession plan to your trusted professional
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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It is not uncommon for parents to provide monetary gifts to their adult children. Parents may wish to help their child with a down payment on a property, or help pay out their child's existing mortgage.
On March 31, 2014, BC's new Wills, Estates and Succession Act1 ("WESA") will come into force. WESA introduces new protections for beneficiaries of estates that are in danger of being disputed or deemed ineffective by a court.
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