Building beyond today: Succession planning in real estate and construction

Ask any contractor, developer, or trades professional what keeps them up at night, and you’ll likely hear the same concerns — labour shortages, rising material costs, and tightening margins. But one challenge often gets overlooked: what happens when a business owner steps away?

On Vancouver Island, where an aging workforce and industry consolidation are accelerating, succession planning is no longer a distant issue. Without a plan, many owners risk leaving their businesses — and employees — in a tough position when the time comes. Yet, too many put it off, assuming they’ll deal with it later. The hard truth? Later is often too late.

Why succession planning can’t wait

In construction, success isn’t just about building structures — it’s about building a business that lasts. Ironically, the more indispensable an owner is to daily operations, the less valuable their business becomes when it’s time to transition.

Many Vancouver Island construction businesses started as small, owner-operated ventures that grew into substantial enterprises. But without a plan, they often face abrupt closures or fire sales, leaving owners with far less than expected.

Beyond ownership transfer, continuity is critical. If an owner suddenly steps away, who’s managing job sites, running payroll, or securing new contracts? Succession planning isn’t just about finding a buyer — it’s about ensuring the business continues to operate smoothly and maintains its financial stability.

The tax factor: Protecting business value

Managing tax liabilities is often overlooked in succession discussions, but it plays a key role in maximizing business value. Decisions made today determine how much wealth an owner actually retains when exiting the business.

For example, Canada’s Lifetime Capital Gains Exemption (LCGE) allows business owners to shelter up to $1.25 million (as of June 25, 2024) from taxes when selling qualifying shares. However, many businesses don’t structure themselves properly to qualify, leaving substantial money on the table.

Employee Ownership Trusts (EOTs) offer a tax-efficient way to transition ownership to employees, but they require years of preparation. Meanwhile, outdated corporate structures, poor bookkeeping, or aggressive tax filings can complicate or even derail a sale.

Without solid financials, a business worth $15 million on paper could sell for far less. A well-prepared business attracts better buyers, commands higher valuations, and ensures a smooth transition.

Choosing the right successor

Every business transition is unique, but assumptions often stall the process.

Some owners plan to pass their business down to their children, only to find out they’re not interested or prepared. Others expect key employees to buy in, without ever initiating the conversation or providing financial pathways to make ownership viable.

For those considering a third-party sale, preparation should start years in advance. Buyers are selective, and they look for businesses with strong financial records, clear leadership succession, and operational stability —not companies still reliant on a single decision-maker.

A case study in success

One Vancouver Island construction business recently proved that intentional planning pays off. The owner, a well-established trade contractor, identified a group of trusted employees eager to take over. Over five years, MNP worked closely with them to structure a buyout plan, securing financing to fund the first phase of the transition.

Revenue initially dipped, but within four years, the new owners doubled it. The original owner exited at a significantly higher valuation, and the new owners secured financing from a major bank — something that wouldn’t have been possible without a structured, long-term strategy.

Navigating local challenges

Succession planning on Vancouver Island comes with unique obstacles. The tight labour market makes it critical to retain key employees and establish strong leadership continuity. Buyers and successors want to see a business that can function beyond its current owner.

Additionally, increased CRA audits, shifting tax laws, and rising compliance requirements make proactive planning more important than ever. A business won’t sell itself. Owners need at least five years of planning to maximize value.

The future of succession in construction

As industry consolidation accelerates, larger firms are acquiring smaller ones, and buyers are becoming more selective. Businesses with strong financials, clear processes, and leadership plans will achieve the highest valuations.

If you haven’t started planning yet, now is the time.

Let’s start the conversation