Many retiring business owners feel overwhelmed by the day-to-day running of their companies and keep putting off succession planning.Drs Producoes/iStockPhoto / Getty Images
A great wealth transfer may be underway, but many business owners who’ve generated that wealth are still figuring out what to do with their companies when they retire.
According to MNP LLP’s succession readiness report, almost two-thirds of retiring Canadian business owners have thought about their exits but haven’t considered the details.
“They’ve thought about what their business is worth, they’ve thought about who they may transition or sell their business to, they’ve maybe thought about timeline,” says Kerry Smith, national leader, family office services, at MNP in Vancouver. “But they’ve yet to formalize that into a written plan.”
Only about 9 per cent have established clear, actionable goals for the turnover, the report found, while 21 per cent haven’t even started thinking about a plan.
Globe Advisor spoke with Mr. Smith about how advisors can help. We also have recent articles on the advisor’s role in succession planning, how employee ownership trusts are a new option for business transfers, and what advisors need to consider in their own succession planning.
What’s preventing business owners from succession planning?
Much of it comes down to feeling overwhelmed. There are so many moving pieces to a succession plan, so many things to consider, and so, they almost become paralyzed because they don’t really know where to start.
What is the best place to start?
We would say the best place to start is having an initial conversation with a qualified professional in this space. That allows the business owner to express their wishes, talk about their concerns, and talk about their goals and objectives. Once you have that roadmap, you can start to peel apart the different pieces you need to work on and create an action plan.
Financial advisors have business-owner clients who may be in this situation. What’s the role for advisors?
Open the dialogue. We know [business owners] are thinking about it, but they don’t know where to start. If they have a trusted person in front of them who’s opening up and talking about this – talking about their goals [and] what concerns them about succession planning – [that] really helps them feel like something’s starting to happen. Many times they have no outlet or no one to talk to about this stuff.
How important is it for advisors to have a network of professionals in this space they can refer clients to?
When we think about working with clients through succession, it’s not just one person. There’s a multitude of professionals the client is going to want to work with to build out that robust plan.
Having a financial advisor to help build up that financial plan and understand how the business is going to help serve those personal needs is really important.
On top of that, you’re going to have someone who specializes in succession planning who can help build and document many of the processes that need to happen, [and] who can help with the governance that needs to change or be created for that client. Obviously, tax is going to be part of that puzzle as well.
So, it fits well for [financial advisors] to have those connections, so that full wheelhouse can be brought to the client to help them in their journey.
Many advisors are retiring business owners themselves who may or may not be doing the succession planning they’re advising their clients to do. How does this issue extend to advisors?
If you’re going to talk to your clients about it, take a look at your own situation and say, ‘Do I have these things in place for myself?’ We talk about helping clients through difficult situations when we’ve lived those situations ourselves. It’s those stories we can share with our clients to help start the process. It also can potentially create a good icebreaker, because if there’s an advisor who admits that, ‘Yeah, maybe I haven’t done this and I need to do it,’ it creates that opening conversation with your clients.
This interview has been edited and condensed.
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