When it comes to running a business that you’ve poured your heart into over the years, you’re probably no stranger to planning. You created a business plan, organize your day-to-day operations and plan for the unexpected. But are you planning for the future of your business when you are no longer running it?

When members approach our team about starting or running their business effectively, we always recommend creating a succession plan. Start by asking yourself the question “What happens to my business if I’m not here?” Succession planning is often thought about in terms of retirement, and who will take over your business at that time. In reality, succession planning comes into play in any situation in which find yourself no longer in an ownership/management position. And just as with a personal will, as time passes and things change, your succession plan may need updating.

In terms of who will take things over after you're no longer involved, oftentimes a small business is sold to or inherited by a family member, sold to a partner or key employee, or to an external buyer. As you likely know, nothing in life is free and that includes succession planning. Here are some of things to consider:

• Creating the plan – When creating a succession plan, hopefully you're in the position to be thinking at least 2-5 years in the future. This allows time to get all of your affairs in order.  When it comes to actually creating your plan, depending on your area of expertise, it may be wise to hire a professional to help you do so. This could involve a business broker or a lawyer and there are, of course, costs associated with this. This is a budget line you may not have thought about but it’s an important one to include in cash flow planning. Your Commercial Account Manager or Financial Advisor can help you work this cost into your operations, if you aren’t sure where or how it will fit.
• The value of your business - Knowing the value of your business and your assets, including your employees, is an important step in creating a succession plan. Whether you're selling your business or you're passing it on to a family member, a proper valuation of your business is important.
• When the time comes – Now that you have the plan in place and you’re getting ready to part with your business, you’ll want to make sure it’s attractive as possible to a potential successor. Some of the ways you can do this is by having all of your finances in order, including payments and debts up-to-date, and financial forecasting prepared.
• After the sale – With any sale in Nova Scotia, there will be tax implications. Once your business has changed hands, you will have to consider the Capital Gains Tax. An accountant or tax professional can help you prepare for this and hopefully minimize the financial impact.

The cost of succession planning may seem high, but the cost of not doing it at all is far higher. After years of investing so much into your business, making sure that you’re prepared for the possible outcomes of your absence can result in your business continuing to operate, even after you’re no longer part of it. Without a plan, a sudden exit could leave the company unprepared and could seriously compromise its future.

If you have any questions about succession planning, the costs associated or who to work with, give us a call at 902.492.6500.

Revised Jul. 4, 2021