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When Business is Also Personal


“It’s not personal. It’s just business!”

As the new wave and dynamics of business evolution embrace business growth and transitions, many Edmonton businesses deal with the essential needs for effective succession planning. They are creating the detailed business plans, projecting revenue growth and future success, and they are also redefining one of the most frequently used (and abused) business cliches.

As many transitioning businesses and advance planning business owners are finding out, once the volumes of hardcore business i’s are dotted and t’s are crossed, the best of succession plans are inevitably personal.

Edmonton advisors, financial planners and business strategists echo a unanimous warning and urge that business is business, succession planning is the ultimate risk management and failing to plan is tantamount to planning to fail.

Beware! It can have severe consequences. Such as the owner miscalculating the full value of their business, alienating potential successors like existing and deserving senior management or family, damaging client and partnership relationships, uncertainty for staff and a potential of low morale and increased difficulty securing long-term financing due to lender concerns about inadequate business planning.

There are many repercussions about not having a plan. Expert financial planners and advisors warn that a business’ financial risk increases exponentially without the buffer of a succession plan. Without effective planning, the sudden departure of the leader, for whatever unexpected reason, causes considerable financial uncertainty and damage, suspends initiatives, disrupts third-party and partner relationships, triggers loss of revenue and more.

“Having a plan is critical and it’s an absolute must!” says Samuel Chinniah, senior vice president at CWB Wealth Management. “Sometimes it may not be an easy decision because, for some entrepreneurs, their business is a lifelong passion and it feels more comfortable to stay the course and procrastinate. But a succession plan unlocks the value of a company and effectively addresses all possible needs – business and personal. Communicating the plan to all stakeholders is also very important.”

While experience and case studies underscore the uncertainty and turbulence caused by the sudden vacancy of a key position within an organisation, contrary to the stereotype, the blame for not pursuing a succession plan is not always on a stubborn, preoccupied or in denial business owner. Recent business surveys illustrate the failure or lack of succession planning as also caused by boards of directors and stakeholders failing to make it an advance planning agenda priority.

There are also day-to-day business challenges: the lack of clarity and a structured process, ambiguity of accountability for succession planning, decision-making based on gut feel over objective data and other factors.

Chinniah says, “The cost and complexity of a succession plan can be significant heavy lifting for smaller, private businesses. But it is a critical and an absolute must.”

The unvarnished, basic facts and trends expose a puzzling reality about Canadian business. Stats show that, for one reason or another, about 76 per cent of Canada’s business owners plan to exit their business within the next decade, with a potential of more than $2 trillion worth of business assets changing hands. Despite that ominous forecast, Canadian business trending also warns that only 1 in 10 (fewer than nine per cent) of business owners actually have a formal business succession plan in place to ensure a smooth transition of their business.

According to a recent Business Succession Planning Survey done by the Canadian Federation of Independent Business (CFIB), Canada’s champion of small business (SMBs) with over 97,000 members, small business owners are notorious for getting personal and procrastinating.

The Survey tracked that 75 per cent of owners will leave their business for retirement, while 22 per cent will leave because of stress and 21 per cent opt to step back from their responsibilities as owners.

The CFIB Survey also highlighted the common consensus among many business owners that, given the magnitude and complexity of the succession planning process, many owners insisted they are too busy running their business to take the time needed for succession planning.

But when the planning decision is eventually made and sleeves get rolled up, the professional planners and advisors work closely with the owner and senior leadership team to map out the facts and figures and details of the business’ targeted succession plan, in varying degrees, it does inevitably get personal.

“There’s no denying that an individual’s identity is linked to that of their business,” says Stacey Boychuk Cooper, principal with Edmonton’s Baker Tilly RSG, one of Canada’s largest associations of chartered professional accounting firms. “Just like people do not want to think of their death and they delay preparing their will and other estate documents, owners tend to still focus on the immediate management and strategic planning of the business, more than thinking about things like a future sale.

“Bringing in an external advisor for the succession planning stages is worthwhile to help navigate the roadmap ahead, as well as deal with the psychology of having that business – the ‘baby’ that they helped grow and nurture – transition to a new ‘parent.’”

She acknowledges the business art and science of revenue streams, cash flows, growth, and other vital components of the succession business plan. She also underscores the sometimes intangible personals about succession planning, confirming that legacy and family feelings are significant aspects to consider.

“It’s very important. There really isn’t a one-size-fits-all approach when it comes to succession planning. The psychology and emotional elements, as well as the family history of the people involved, are very complex and need to be unraveled to find a good middle ground that fits for everyone.”

Chinniah points out that, “Of course, treating everyone equitably is important, but reality is that sometimes it is not so practical or possible. Business owners have a strong emotional attachment to their business. It is their reputation. In many cases, they started something from nothing. But the succession plan is ultimately a critical business plan, and the priority is how to maximize and unlock the value of the business, not just hand it over. Despite emotions and family issues, the key is to groom the next generation to take it to the next level.”

Regardless how business focused or allowing for the touchy maneuvering of succession speedbumps like family, emotions and personal feelings, the intricate and carefully strategized details of an effective succession plan eventually empower the transitioning business owner to juggle the personals and prioritize the vital needs of the business.

The CFIB Survey showed that an overwhelming 49 per cent of owners will exit their business by selling to an unrelated buyer, and only 24 per cent plan to sell to a family member.

Cooper points out that, once the business details are in place, the succession plan is very important to provide the owner with enough runway for success to occur with new ownership and dealing with new realities.

“An effective succession plan lays it all out about what it will take for the business to continue operating successfully. For the owner, it also helps determine ‘what’s next?’ and helps with emotional readiness.  With a solid succession plan, rather than lamenting the loss of the business, the owner can embrace the transition.”