It’s never too early to plan for business succession
Even before COVID-19 hit, demographic shifts were starting to change the landscape for business owners. A 2018 survey by the Canadian Federation of Independent Business (CFIB) showed that almost 75% of small business owners plan to exit their business within the next 10 years. However, the survey also showed that most business owners are not adequately prepared to transfer control of their businesses: Less than 10% of those surveyed had developed a succession plan, while 51% said they did not have any plan at all.
As a business owner, it’s never too early to start preparing for the day you leave your business — or indeed, for any eventuality. As Dave Kelly, SVP and Head of Private Wealth Management and Financial Planning, TD Wealth, says: “COVID-19 has disrupted lives and businesses in unexpected ways, and many are taking this moment to pause and evaluate if they are as prepared as they would like to be, from both a personal and business standpoint. That may include building resilient investment strategies, succession planning for the day you step away from your business or will and estate planning to optimize the transfer of your wealth.”
So whether you are planning to transfer control of your business in the future, or are exploring your options in the short-term, the time to start planning is now. Here are some tips and strategies to help get you started:
Succession planning checklist
- Put a business contingency plan in place. That way, if something unexpected happened, there would be a plan in place for the business to continue and your family to be taken care of.
- Revisit your investment strategy. Does your investment strategy match your current needs and lifestyle? Review your investment plan with your Wealth Advisor to ensure it’s on track to meet your longer-term goals.
- Decide when you want to retire. Take the time to think about the next steps in your journey. Talk to your family about when you’d like to retire, in light of your financial situation and plans for the future.
Your business is unique, and there is no one-size-fits-all succession plan.
- Identify possible successors. If you have children who want to be involved in the business but others who do not, consider an estate equalization strategy to make things equitable for all family members. Or you may want to expand your list of potential successors to include a key employee, business partner or someone outside the business who can bring in a fresh set of skills and contacts.
- Bring in professionals. Consider what professional advisors should be involved in your plans. Your team of advisors might include your Small Business Account Manager, Wealth Advisor, lawyers, accountants and others.
- Maximize the value of your business. Determine the most tax-effective way to sell your business, in consultation with your lawyer and tax advisor. This may help you maximize its value and provide for your family’s future.
We can help
Your business is unique, and there is no one-size-fits-all succession plan. Speak to your TD Wealth Advisor about financial solutions to support you and your business through recovery. And speak to your TD Account Manager for all your business banking needs.