Succession plan
A succession plan is a documented plan for how ownership and leadership of a business will transfer — to a buyer, to family, or to management — including timing, valuation, funding and the handover of relationships and knowledge. It is planning done before a sale is urgent, which is what separates it from simply selling.
Canada is in the middle of a large generational transfer of business ownership. Research by the Canadian Federation of Independent Business has found that a substantial majority of small business owners intend to exit within a decade, while the large majority have no formal succession plan in place — a gap measured in hundreds of thousands of businesses and a very large amount of value.
What a real plan covers
- Who the business transfers to, and what happens if that route falls through
- A defensible valuation, and how the price gets funded
- The tax structure, decided early enough that share qualification can be fixed if needed
- Reducing owner dependence: documented processes, a second-in-command, transferred relationships
- A timeline with dates, and what happens on death or incapacity before then
Why the timing matters so much
Almost everything that raises the price of a business takes one to three years to change — the tax structure, the management layer, the customer concentration, the quality of the financial records. An owner who decides to sell and expects top value within six months is working with none of those levers available.
Sources
This definition is checked against primary sources. Links were last confirmed on the dates shown.
- 01Canadian Federation of Independent BusinessResearch dataSuccession Tsunami: Preparing for a decade of small business transitions
- 02Canada Revenue AgencyGovernmentSelling a business
- 03Business Development Bank of CanadaIndustryHow to sell your business
- 04Treadstone LawLegal commentaryExit Options for Ontario Business Owners Compared
- 05Treadstone AssociatesAdvisoryFamily Business & Succession — preparing to sell, transition or hand over
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