Planning For Succession (1)
Asset/creditor protection and the valuation of your business requires on-going attention.
By being proactive, say 5-7 years out, you are in a great position to minimize risk and maximize the value of your business.
The First Step
♦ If something happened to you today
• who would run the business?
• what income would you need?
♦ Valuation-how much do you think the business is worth if sold to an:
• outside buyer
• family member
♦ Do you have a Will, power of attorney, shareholders agreement?
♦ Do you have a strategic plan?
♦ Who are the stakeholders in your business?
• family members
• key employees
Family Participation Plan
♦ Criteria for family to enter the business
• age,
• experience
• education
• compensation
♦ Who will have voting control of the company and for what period?
♦ Training and supervision, mentor
♦ Retirement
♦ Marital issues, protection, transfer of ownership
Management Buy-Out
♦ Qualifications of key employees
♦ Do they get along with other stakeholders?
♦ Are they present for the long-term?
♦ Can they afford the purchase?
♦ Are they insurable?
♦ Do they have good leadership?
♦ Are they free of baggage?
Improving The Value of Your Business
♦ Focus on growth prior to the sale
♦ Evaluate discretionary expenses
♦ Assess company performance to others in the industry
♦ Document business decisions and operational systems to make transition easier for the purchaser
♦ Remove non-operating assets at least 2 years prior
♦ Purification, deal with tax issues
♦ Debt restructuring
♦ Restructuring shareholdings to maximize after-tax cash flow from sale
♦ Transition team in place
Footnote: Reference to CICA publication on Succession Planning
In accordance with Circular 230 Disclosure
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