Make time to plan a smooth exit, no matter when you leave

If you operate a business in the real estate or construction sector, you probably have the goal of selling it down the road so you can enjoy your next stage. Planning for succession early is the best way to ensure you achieve that goal in the event you end up exiting your business sooner (or unexpectedly) rather than later. Taking the steps to develop a succession plan now, so it’ll be there when you need it most, can help you get better value and ensure you have the widest array of options.

Engaging with a succession specialist early will also help you establish a team of insurance agents, financial advisors, lawyers and accountants who will work together to ensure you exit on your own terms and timelines.

As you consider transitioning out of your business, the following advice will help to ensure that you’re in a good position to sell even if that happens earlier than you expected.

1. No matter where you are in the business cycle, making time to focus on succession has benefits.

For business owners who typically put in long hours taking care of day-to-day tasks, it can be tempting to wait until you’re ‘not so busy.’

The reality is, you will always be busy. The earlier transition planning is done, the more options are available to you and the higher the likelihood of a successful outcome.

2. The value of a business is not based on what you think it is worth, but on what the market will pay.

If you need a certain amount of cash out of the business, to fund your next stage, get at least an approximate valuation as soon as possible.

Then, if the business value (net of tax), is insufficient to meet future requirements, you can begin to build value by identifying the true value drivers in your business and implementing an enhancement process. One of these key value drivers may be developing a key employee retention program.

In today’s hot labour market, plans that attract and retain top talent are extremely valuable. In fact, succession plans that include the sale of all or part of the business to employees are among the most popular in the market today. 

Planning ahead will give you time to identify strategies that will give you the biggest benefit and also to put those plans into action.

3. Exit planning requires a team approach to ensure the interests of all stakeholders are managed.

Shareholders and in many cases, family members, need to have input on your plan.

Establishing your team (comprised of your lawyer, accountant, wealth advisor, succession planner, and possibly others) will ensure you are in a position to manage your advisers to get full value — and minimizes the chance of overlapping or unnecessary fees.

4. Potential buyers need to feel that the business can thrive after the transition.

Many business owners are highly involved in their businesses, even at the mature stage of the business cycle. They have the relationships with key customers and suppliers, make all major decisions and often hold a great deal of information in their heads.

Building a strong management team in advance enhances goodwill and adds value to your business as it gives the prospective buyer / new owner confidence that the team can assume these aspects of the business.

5. Use your tax and estate planning time to ensure you maximize the amount you receive for your business.

The decision to sell will influence your tax situation. An experienced tax advisor can take you through your options and help you create a plan that minimizes immediate and future tax liabilities for all key parties. Tax strategies continually change so ensure this aspect of your plan is updated regularly.

Contact us:

For more information, contact:

Shane King, CPA, CA,
National Leader, Succession Services
[email protected]
604.542.6715

Lynne Fisher
National Team Leader, ExitSmart 
[email protected]
780.401.7085