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Congratulations! You clicked on this post, which means you’re most likely starting to think about the future of your business and do some long-term planning. And although planning how and when you intend to exit your company may not be the most exciting task– business succession planning for your Manitoba business is so important.
Business succession planning is how you– as a business owner– protect the legacy of your business while still protecting your personal financial security. It is part of a larger financial planning process, meaning that it should be addressed at various stages of your financial plan and reviewed regularly. It also should include talking to specialists to ensure you’ve considered as many factors as possible, including ensuring you have the right insurance to cover both you and your business.
In this article, we break down what business succession planning is, why you need it, what steps it entails, and how to do it successfully.
Prefer to skip the reading and jump right to speaking with an insurance advisor to make sure you have the right coverage? Go ahead and get in touch!
Business succession planning is the process of determining what will happen to your business when you make your exit.
It involves figuring out how to transfer your business ownership and transition out of a business management role while still maximizing your personal financial security.
There are many reasons businesses need to have a succession plan:
As we already mentioned, business succession planning isn’t an isolated event. It should be part of your larger financial planning process. This means that it’s never too early to start planning!
As you start the planning process, we recommend speaking to multiple different specialists and advisors, such as:
They’ll be able to help you consider and plan for multiple different factors, including:
As much as we’d love to provide you with a one-stop-shop checklist, the reality is that successful business succession planning will look different for every business and business owner.
This is why creating a team of specialists and advisors is so important. Each of these specialists will offer a different vantage point and items of consideration. Plus, they’ll help you build your checklist along the way.
No matter your company, though, we suggest you get started by picking a successor, determining your company’s value, and– if you don’t already– getting life insurance.
You’ll want to know that you’re leaving your business, employees, customers and other key relationships in good hands. You’ve worked so hard to build up this incredible business that you’ll likely want your legacy to live on in a certain way, and choosing the right successor can help accomplish this.
Picking a successor sooner rather than later can help reduce stress on you and your partners/family members should the need for your succession plan be enacted sooner than you had initially planned (for example, following an illness, disability or loss of life).
Plus, it gives you time to start preparing them. Taking over a company is no easy work. Having more time to get them ready means a smoother transition for everyone involved.
Determining your company’s value will help you get the most return out of all the work you’ve put in. And it will help reduce the guesswork in determining the sale price as you plan for your business’s future and your exit. Not to mention it can help you minimize tax implications.
When doing this, ensure you consult the right professionals to build your plan.
Life insurance forms another part of your financial plan and should be considered early on in your life and/or business life cycle. If you, or a business partner, don’t already have life insurance, now is the best time to get it.
Life insurance removes the guesswork, reduces stress, and provides a clear plan that your family and business partners can rely on.
Plus, if one of your business partners was covered with life insurance and were to pass, their death benefit could be used to buy out their business shares and distribute them equally amongst the other partners.
And if you have a life insurance policy through your company, consider how this might change when you leave. You may want a supplemental policy to help ensure your insurability later on.
Business succession planning isn’t all that different if you plan to pass your business on to a family member. However, sometimes people tend to skip over steps or ignore warning signs when planning to hand their business over to a loved one.
If passing your business to a child or close family member is a part of your plan, be sure you’re considering the following:
Business succession planning isn’t an isolated event. It’s part of a larger financial planning process, meaning that it should be addressed at various stages of your financial plan and reviewed regularly.
The best way to create a business succession plan for your business and ensure all your unique factors have been considered is by getting a group of specialists on your side– including an insurance advisor.
Life insurance can help provide financial support to your family and/or business partners in case you were to pass away unexpectedly. Dealing with the loss of a loved one is challenging and expensive enough without having the financial stress of their business.
Start your financial planning today by speaking to an insurance advisor. They’ll be able to help discuss your long-term business goals and what insurance policies can help protect you and your loved ones while you get there.