Succession planning by business owners is tremendously neglected, and this can be extremely costly. Why do business owners so often neglect this important area? I can think of 2 main reasons. First, most business owners are so busy that they simply don’t have time (or think they don't). The second reason is that they probably don't realize how important it is. When your business is hurting because of a cyclical downturn, that's not a good time. When you have unexpected health issues, that’s not a good time either. And when you dead and buried, and your widow or partners have…

There are four factors that affect the timing of succession planning: company factors, environmental factors, operational structure factors, and personal factors. Company factors: These involve things like: how dependent is your company on you, how long will it take to transition from you to new management, how ready for sale is your company (is it structured to facilitate a sale), and how has the company been performing. A company with a short track record or one with flat sales and profits will be much harder to sell than one with a history of steadily increasing sales and profits.   Environmental factors: Trying to sell your…

Prior to commencing the sales process, your company should be re-structured to remove redundant or surplus assets. Working capital needs to be managed to increase value. For example, non-current accounts receivable can be collected, or written off. It might be tempting to cut expenses to temporarily boost profitability, but care must be taken – sophisticated buyers will take notice if they see dramatic reductions in advertising or marketing costs to boost profit artificially.

There are a number of ways that income taxes can be minimized when selling your company. For example, the life time capital gains exemption of $750,000 can be crystallized and often other family members can enjoy the full exemption too – careful planning is required. Holding companies can be used to defer taxes and also protect against creditors. Individual pension plans (IPP) can be used to maximize tax sheltered retirement assets.