Most succession plans and strategies deal with selling a business and investing the proceeds to live well through retirement.  Not much or any real thought is given to what the business owner wants to or can do with her or his time, post exit. Maybe a “bucket list” exists or the few non work activities developed over their career are still of interest.  These won’t fill the life of what has been to-date an entrepreneur mostly consumed with work. The business owners I have known all lived their work, initially out of necessity and then from habit. They literally took their identity from this business that they created, nurtured and needed to sustain their desire to build a thriving enterprise.

And then I am seeing more “young” business owners who sense it’s time to get at some of the other important undone adventures of life. As Rick George is quoted in this past weekend Globe and Mail (he has just at 62, stepped down as CEO of Suncor)``Suncor, after swallowing Petrocan, had started to become that kind of place (referring to huge Exxon Mobil Corp.) where procedures began to rule over personal initiative. The fun was gone.  According to the article he has a full post succession agenda.

One business owner commented to me that he imagined himself sitting on a plane and, upon being asked by someone what he did, having to say that he spent his time fixing up old cars. Which he does quite well in fact however he didn`t see it as his identity. He`s still running his business by the way.

So each business owner needs to spend some quality time addressing the question, ``and what now my friend?”

If a return to skiing is contemplated maybe getting into the gym with a trainer will be needed.

If the urge to “give back” is present, the way in which the proceeds from the sale of the business are invested may have to be structured to enable philanthropic gifting.

Whatever the plan, understand that going from being an owner, with important, time critical business to do, to an idle, perhaps wealthy but none-the-less idle, individual, is not healthy or after a short rest, life fulfilling.

Like the more tangible parts of the succession plan, the post succession bit needs some critical thinking and will always benefit from inputs from those close to you.  Then you will be able to say, as Mr. George does, “Life’s been full actually. I haven’t been resting on my laurels at all. And I’m quite excited about what we’re doing next”.

John Bielby

Within the coming 15 years, more than half of the country’s current small business owners are expected to retire.  Only two in five small business owners have a clear plan for exiting their businesses.

Good succession planning increases your chances of business success.  It is the best way to secure your company’s continuity.  You can always make better business decisions by planning ahead. If you start to think about succession planning early, you can take a more objective look at your future needs and avoid last-minute decisions.

An effective succession plan will help you in a number of ways.  A succession plan has many benefits, regardless of the size of your business and what stage of the business cycle it's in.  By thinking through your plan, you can minimize the tax costs of any transition in the company’s ownership and management, work to maximize the value of your business before transition, structure the most effective retirement income for the retiring owner and have the best chance of a smooth transfer of your business.

A succession plan consists of a series of basic steps, such as setting your financial goals, determining legal requirements and establishing your objectives with your family or successor. Every situation is different, and it can often be complex and an emotional process for a business owner.

It is never too early to start the planning process.  A good succession plan can take many years to formulate, formalize and put into action.  Using expertise, as provided by the Osborne Group, can help you establish the structure of the overall plan, as well as assist in the coordination and implementation of the important transition steps in this very important area.  If you don’t already have an up-to-date plan, contact us.

Ken Goodwin

The Grandkids have just started school, the leaves are beginning to fall and the youngest Baby Boomer is turning 46 having spent over 20-25 years in the workforce.  Soon they will be looking to pursue other interests in the next two decades.

The first of the Baby Boomers as defined by David K. Foot in Boom, Bust & Echo has just turned 65. While many demographers, including Foot have forecasted a skill shortage in the future, that time has come and many organizations will be facing skilled labour shortages as the Baby Boomers begin to exit the labour force.

Currently in Canada the Baby Boomers account for 50% of the labour force over 25 years of age and 50% of the Baby Boomers labour force is over 55. While there is no longer any mandatory retirement at age 65, organizations are going to have to deal with a very huge skill and knowledge gap as individuals with 35-40 years’ work experience begin to leave their organizations.

So as a leader of an organization or an owner of your own business it has never been more important for you to have a well-developed and thorough succession plan in place for the key roles within your organization.

A solid succession plan will avoid surprizes. You don’t want to be forced due to health issues or an untimely death to do something that is not in the best interests of the business. Having the next leader ready to step in will maintain stability in the organization during turbulent times.

A good succession plan takes time to develop and implement. Not only do you need to identify the right candidate to succeed the current leader,  you also have to allow those individuals time to get the right opportunities in advance of their succession so they will truly be able to succeed once they take on the role.

Finally a well thought out succession process will maximize the return on investment that you are making in both the business and the individual. Remember it has taken years for you to gain the knowledge that allows you to be successful.  It would be a shame not to provide your replacement with that same opportunity.

We will have another blog later this month that will focus on the importance of succession planning when it involves a family run business and the need to properly focus exiting the business or passing the business on to the next generation.

Mike Dick

Almost all enterprises undergoing a change of ownership use a formal business valuation at some point in the process.

What are the uses for that valuation?

Firstly although a starting point in a negotiation to sell a business, the valuation is rarely the price at which ownership changes hands. Price is driven by any number of other variables including but not limited to, special synergistic value for the purchaser, potential distressed selling circumstances affecting the current owner, methods of financing the sale/purchase, and numerous others.

Generally the business valuation may determine the “fair market value” for which in Canada, an accepted definition (per the CICBV) is “ the highest price, expressed in terms of money or money’s worth, obtainable in an open and unrestricted market, between informed and prudent parties acting at arm’s length and under no compulsion to transact”. That is a mouthful and needs careful breakout into its constituent parts.  We can come back to that in another blog however its usage is often in the following  circumstances:

-        To develop a price in a non-arm’s length transaction where the business will never be exposed to an open market

-        To allow tax matters to be properly dealt with from the tax authority’s perspective

-        To support applications for financing at various financial institutes

Suffice to say that valuation is not solely an exercise in mathematics but requires the use of an accredited valuation expert such as a Chartered Business Valuator who will bring experience, informed judgment and adherence to standards for business valuation. Clearly it is never a one-size-fits-all process even for businesses in the same industry. A comprehensive valuation report will expose value not always appreciated by owners and also point to business weakness allowing correction by the current owner before hitting the market.

So if you are about to sell your business in any fashion, expect to seek out and use a formal business valuation preferably at the start of the process to avoid costly mistakes later.

John Bielby

You think you have made all the right moves to ensure the firm is in good hands when you leave or retire. You have a candidate lined up to move into place and your customers and suppliers know what is happening. Sounds good but what now?

The tough part…Transitioning the top role in a smooth and thoughtful way is a key step often missed!

So where do you start? How about a short self-evaluation?

Are you truly ready to leave your role? Many senior leaders who have been in the role for some time cannot separate themselves from the firm easily, resulting in potential conflict with the new candidate or the firm’s different stakeholders. A structured transition plan with coaching resources to help ease your way out is a big step forward. Next item to consider is do you have an established timeline? Working yourself out of a role in a deliberate and orderly fashion is very hard for some to consider but that is exactly what has to happen. I could write a book about owners, general managers and senior executives who said they were ready to leave, prepare their replacements and staff only to return to the organization regularly to check on “how the new guy is doing”. In most cases the transition plan if any did not assess the old leader’s needs and generally turned out badly for all parties. Customers and staff are at particular at risk when this happens as they are often left confused, presenting a big risk to the future of the company.

So the advice goes like this at a minimum:

• Evaluate your own needs to transition properly early on
• Establish a detailed timeline/transition plan and communicate it to stakeholders.
• Take full responsibility for the initial success of the new leader just as you would have for any new project you managed
• Finally, celebrate success when you hand off your responsibilities in a responsible and supportive way. Not all transitions are managed well, so be the exception!

David Rankin