As there is no “one size fits all” succession plan, the process can feel daunting.

Not knowing where or how to begin gives business owners an excuse to bury their heads in the sand and put off planning for another month…or years. Time flies when you are procrastinating! But as noted in earlier posts in the series, waiting too long to start planning can result in fewer options and fewer dollars in your pocket.

So let’s take the mystery out of where to begin!

A good place to start is to think about what you want and need upon retirement.


How much would you need to retire?

This seems simple, but is often far more complicated in practice. Many business owners tend to think they will never be able to retire or have inflated ideas of the funds they need to retire. To take the mystery of out of this, it is good to start thinking about your expenses and any changes expected upon retirement. For example if you have an outstanding mortgage on your house, that is a current expense. But if you plan to retire in five years and your mortgage will be paid off in three years, you can exclude those mortgage payments from your retirement expenses. It can be helpful for business owners to discuss this very question with their advisors (accountants or financial advisors) in order to come up with a realistic vision of future monetary needs. Advisors often have templates on hand that can help guide you through this process.


Who would you like to take over the business?

This can be a question loaded with emotions and again can lead to a business owner putting off thinking about the topic all together. As noted in part 2 of this series, we talked about needing to ensure your successor has adequate skills to successfully operate your business. Therefore you must consider whether having your adult children run the business after you retire will result in the business’ continued success. You must also remember that ownership and employment are not the same thing. Ownership involves being a shareholder and therefore having some say strategically while employment involves the day to day operations of the business. You could decide that your children do not have the skills or interest to run the business and therefore should own the business while another individual or team runs the daily operations. This decision may be difficult to make, but you are not alone as only 30% of businesses make it to the second generation and only 12% survive to the third generation (Family Business Institute, 2018).


Once you have an idea of what you think will work for you, the hard part starts – gaining buy-in from all those who will benefit or be affected by your plan. It can be useful to meet with professionals (lawyers and accountants) early on to help you draw out all the details of the transition. These professionals can also be helpful in discussing the plan with those affected by it. Planning a business exit is a time where emotions run high for the owners, their families and their employees therefore communication is key. This means it is very important to explain the plan to those stakeholders throughout the process. Of course not everyone has to agree with how you decide to transition your business, but it is important the stakeholders understand why you have made those decisions in order to preserve family relationships. As our Tax Partner, Shawn Deyell, CPA, CA, TEP noted, “succession planning is only 10% technical execution and 90% relationship management.” Therefore having open lines of communication and potentially even a third-party facilitator can help ensure a smooth and successful succession.

So instead of putting off succession planning for another month, start with the two questions above and take your retirement into your own hands!


Want to check out our Succession blog series?

Succession: What are my options?

Business owners work for years to build up a business that they are proud only to come to the grim realization that they will be walking away from it all upon retirement.

Succession: Are you a budding entrepreneur or someone still growing his/her business?

Want to be your own boss? If you are a budding entrepreneur, already own a small business or are looking to purchase a business, this blog post is for you!