Succession Planning Process

To everything there is a season. If you’re a business owner, the one thing you can count on, along with the proverbial death and taxes, is that your turn at the helm will eventually come to an end. The uncertainty lies in how the transition will unfold: at a profit or at a loss, in an ordered sequence or mad scramble, according to your wishes or against them.

Planning for the succession of your business is a way to put yourself in the driver’s seat before and during the change of guard. “Half of all businesses are sold because the owner has to, rather than wants to, sell,” says Brent Cunningham, a managing partner at Sequoia Business Brokers in Vancouver. “Succession planning helps prepare for such contingencies.”

According to Cunningham, avoiding the process can lead to such grim scenarios as a grieving spouse rifling through ponderous documents and fielding phone calls from nervous employees, clients and suppliers.

A case in point. Several years ago, Ron Sangster, co-owner of Success ’N Planning in Antigonish, N.S., was working with the owner of a small business worth about $1.5 million. “I suggested he set up a succession plan that included life insurance, liquidity management and continuity planning in case he became ill.” Unfortunately, he didn’t and “when the man died, the family incurred $400,000 in legal fees and other unnecessary expenses, and now three years later two of his kids are no longer speaking to each other and the business is barely surviving.”

On the flip side, a game plan allowed Elrus Aggregate Systems, a Calgary company specializing in the design and manufacture of portable sand- and gravel-processing equipment, to handle its owner’s unexpected death from a position of strength. “Even before I arrived, the company had started to plan for the owner’s retirement,” says Greg Helfrich, Elrus’s national operations manager (pictured left). Under Helfrich’s direction, Elrus’s upper- management team “catalogued the skills required for each position and the gaps that would need to be filled if the employee left.” It’s not about pushing people out, just identifying key skill sets and planning for the time they decide to leave, notes Helfrich.