For many business owners it’s the dream: building a thriving company that not only allows them to live a life filled with purpose, but that also creates a legacy they can transfer  to the next generation. 

But too few are putting plans in place today to ensure their future wishes for their business come true. 

“Only one in ten business owners (nine per cent) have a formal business succession plan in place,” says Luzita Kennedy, managing director of advanced planning at Scotia Wealth Management. 

A little forward thinking—and advice from an experienced, trusted wealth advisor—can go a long way when it comes to protecting your hard work and reducing the impact of taxes associated with handing down your business. For instance, Scotia Wealth Management® offers a diverse suite of wealth management solutions especially for high-net-worth individuals and families. It is the wealth management arm of Scotiabank—one of Canada’s most established financial institutions.   

Here are four helpful tips to keep in mind.

1. Start early

Success in business takes preparation and hard work. So does successful succession planning. 

“Succession planning is not easy, it takes time and effort to make a meaningful plan,” Kennedy says. But many owners don’t think about this aspect of their business until it’s close to the wire.

“[Many] underestimate the time required to create a plan and make a transition,” Kennedy says. “Plan for succession well before you need to.”

2. Get professional advice

Business owners tend to wear many hats—sales, marketing, HR, and more. But when it comes to planning for the next chapter of their company, it’s a good idea to seek professional advice from a team of business and family advisory specialists.

“Gauging the worth of your own company can be challenging for business owners, especially those who are burnt out from the day-to-day operations,” Kennedy says. “Few business owners find the time to consider all the potential wealth creation strategies available to them.”

It’s important to understand how to assess the value of your business, and if your goal is to sell, to have strategies in place to protect, and improve its value and appeal ahead of a sale.
From leveraging life insurance as the funding for a sales agreement to taxation strategies such as estate freezes, a knowledgeable wealth specialist can help you build a plan you can feel good about, helping to protect the value of your company and ensuring that your needs and those of your family are met.

3. Make sure you’re covered too

Businesses are typically a separate entity from one’s personal property—and for many entrepreneurs, personal wealth tends to be vested with the company. That means retirement planning can look a little different for business owners.

For starters, how you structure your company and pay yourself during your working years may have retirement planning implications. For example, paying yourself a salary creates RRSP contribution room while dividends do not. 

And when it comes time to handing down the business, you’ll also need a plan to convert your wealth back into personal assets. Whether it’s selling your company, collecting dividends, or another strategy, an experienced wealth advisor can help you identify the best plan for funding your retirement based on your goals for the future of your business.

4. Don’t forget about talent

Even some of the biggest and wealthiest corporations in the world have fallen short when it comes to creating a leadership pipeline that can ensure future success and longevity for the business. If a company waits too long to plan, it could face a long, chaotic search for a replacement that could lead to instability, strategic stagnation and competitive disadvantage. Alternatively, if a company dangles the role of a future leader in front of too many contenders too early, it could trigger internal conflict, damage relationships and ultimately shift the focus of any internal candidates who are vying for the job.

Indeed, while making financial arrangements is important, it’s critical not to overlook a plan for future leadership. This can be an even more fraught decision for businesses where family members—and all their dynamics—may be involved. 

“Finding the right successor or buyer can be challenging,” Kennedy says. “Mentoring prospective candidates is one way to determine who might have the right interests and skills, and can ensure the next leader possesses the institutional knowledge to carry on your dreams.”

To learn more about planning for the future of your business in the age of longevity, click here.