Do I need a succession plan before I consider selling?

Considering a sale and having a succession plan are two different steps. You can explore a sale without a finished plan. But BDC says planning for the sale well in advance makes a big difference, whether the goal is retirement, legacy or staying involved. CFIB describes succession planning as the safe and orderly transfer of assets and calls it critical for the wellbeing of the owners, the business and Canada’s economy. Both treat early planning as important.

What waiting can cost

A BDC director quoted in its guide says many people wait too long to start planning a sale. They then sell at a time that is not ideal, for example because of health issues, and do not get the outcome they would have had with a plan. That describes the risk of starting late. It says nothing about what any particular business is worth, which is a question for a qualified valuator.

What to settle first

You do not need every document on day one. A useful start is three questions. Who could take over: a family member, an employee or an outside buyer? What would a buyer need to see, such as year-end financial statements and written operating procedures? Which advisers do you need? BDC lists an accountant, a financial or estate planner, a family advisor and a certified exit planning advisor among the professionals who can help. The succession plan page sets out what a full plan can contain.

When the business holds personal records

Some owners have an added reason to plan. The Information and Privacy Commissioner of Ontario says that for Ontario health information custodians, an unexpected death can leave personal health information abandoned if there is no succession plan, and that the administrator of the deceased custodian’s estate becomes the custodian until custody or control passes to a successor. That is an Ontario health-privacy rule. Other provinces have their own regimes, and businesses holding other kinds of customer records fall under different rules, so ask a lawyer what applies to yours.