By Alison Anderson - CEO, SuccessionMatching.com
Five years ago I was working with a Community Futures client who was looking for a way to sell his plumbing business without disrupting it in the process. He knew it was going to be difficult to find a buyer while maintaining the strong working relationships he had with his suppliers, staff and customers. During this interaction, it occurred to me that this was a significant problem that a large majority of business owners would eventually face.
It was in that moment when I decided to take an economic development approach to succession planning and provide a service that would offer a very helpful solution to this ongoing problem. It’s an online platform called Successionmatching.com, and it allows business owners to find potential buyers privately. It also connects them with matching officers who can provide resources and advice on where to start their transition plans.
Over the past four years, I have been through many succession plans, gone on speaking tours, and worked directly with clients. From these experiences, I have documented trends and pain points familiar to thousands of business owners who are going through the succession planning process.
According to The Canadian Federation of Independent Business, 70% of business owners are looking to transition. Up to now, there hasbeen a lack of resources to assist business owners, as well as prospective buyers, navigate this process. As an economic development organization, Community Futures Saskatchewan is helping to address this issue by providing 300 coupons to successionmatching.com, which will give business owners in the province access to our system free of charge.
In addition, we are very pleased to offer a step-by-step guide of factors to consider in a business transition plan, which can be accessed below. I also wanted to take the opportunity to answer some of the common questions I frequently receive from business owners.
When do I start my succession plan?
The short answer to this question is: the sooner the better. The average transition in Canada can range in time from two to seven years. In light of this, it’s good to be prepared to contend with a lengthy process in advance.
Ideally, when an entrepreneur is starting a business and writing up their business plan, they should definitely be considering their exit strategy as a part of this plan from the outset. It’s really a matter of best practice and positions the owner to better deal with the uncertainty of the future. So whether unexpected or tragic circumstances arise, or if an ideal buyer happens to appear on the doorstep of the business, the owner will have the benefit of peace of mind and ease knowing that a significant portion of the groundwork for transition has been done upfront.
How do I start?
Individuals closer to retirement or looking to divest within the two to seven year time period should start to be more proactive and begin taking the necessary steps to move the plan from paper to action.
The first step is to find out what type of succession plan is available to you and this can be done though good communication with your family or staff.There are three types of succession plans: family transition, employee share ownership programs, and third party sales.
It is often the case that many business owners believe that they are going to have a family or an employee transition. In the presentations I give, I always ask who is planning to sell to family members or employees, and hands shoot up. I immediately follow up that question with: “Who has already had that conversation with their family member or employees?” Unfortunately, the majority of hands usually go down.
The first step in any succession plan is the same as the first step in any successful relationship: communication. It is critical that you understand what your options are for transition as soon as possible.
Family members or employees aren’t always capable of running the company on their own, and even if they are, they may not have the desire to do so. Even if the desire is present, they simply may not be in a financial position to buy the business. Initiating these conversations can be a highly sensitive task, but when done early and effectively, you will have a much more informed sense of your options for the business transition.
As we’ve just begun to scratch the surface of the elements that should be considered in successful business transitions, I would encourage you to download the step-by-step transition guide for more helpful details. Included is information that can be used review with your family and employees.
For additional resources, please visit a Community Futures office and ask for a coupon code to sign up to SuccessionMatching.com.
