Assessment of potential
Business Succession
How much time does a business owner require to prepare a succession plan?
We have a tendency to underestimate the time required to prepare one’s succession since experience shows us that it will take 5 to 10 years to do so, from the time when we start thinking about it until the time when we can hand over the reigns to our successors. This is why we advise entrepreneurs to start thinking about succession from the age of 50.
What are the steps involved in a business transfer?
Executives must first define their various options, clarify their intentions and vision and then surround themselves with professional resources based on their specific needs. They must organize the communications transmitted to their entourage (what, to whom, when, how), analyze the financial situation of the stakeholders and the organization, evaluate the succession’s competency profile and identify its development needs, plan the tax aspects of the transfer as well as the financing in order to finally set up a transfer plan.
What steps should be taken to identify one’s succession?
First of all, it is imperative to outline the businesses’ needs in order to subsequently identify the profile of the type of executive that will be required in the coming years. In fact, no one wins if a company’s survival is not assured. In every case, general competencies, such as vision, confidence and leadership, are still required. The competencies of the candidates can then be assessed by observing their progress through their assignments or by calling on the services of specialists in the field of management potential assessment.
How should one prepare a succession?
Once the successor is identified, a formal development plan attuned to the specific needs to be developed can be set up. The plan could comprise a variety of activities, such as training sessions, external on-the-job training, internal assignments, special projects, to name but a few. An internal mentor or external coach can also be very helpful for developing management competencies. In each case, you should seek to vary the knowledge of the successor and position the person in winning situations.
Is it preferable to sell one’s business to one’s children?
Statistics show that the chances of success are greater when a business owner sells the business to his/her children, no doubt because they are clearly able to carry on the values established by the previous owner. However, this is by no means a hard and fast rule; in certain cases, it is preferable to sell one’s business to employees or external investors, for example, in the event where the children do not have the required competencies.
Is it preferable to remain in the business for a certain amount of time after having handed over the reigns?
Ideally, the previous owner could act as a mentor for a time, thereby ensuring a smooth transition and the development of the successor’s competencies. There must be a consensus regarding a common vision and distribution of responsibilities. In certain cases, however, the personality of the previous owner and/or the successor makes the prospect of this type of co-existence unlikely.
What are the keys for a successful business transfer?
All the experts and those who have lived through a business transfer agree that sound planning and the support of professionals constitute the main keys for success. This makes it possible to avoid making emotional decisions, to preserve good relations, to determine all of the financial details and, ultimately, to generate significant savings.
How can the professionals at Raymond Chabot Human Resources Inc. help me?
We can round out the services provided by your accountant by helping you define your intentions, plan your communications, assess the potential succesors, develop their competencies, manage conflicts, and adapt your organizational structure and management style to the situation. As the case may be, we can refer you to RCGT’s tax specialists and business valuation experts.
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