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Most Small Business Owners Are Overlooking an Important Part of Business Planning
TD survey finds almost two-thirds don't have a succession plan for exiting their business
TORONTO, Sept. 24, 2014 /CNW/ - Small business owners know the importance of a solid business plan, but when it comes to a succession plan only a third of the one in 10 Canadians with a small business have a strategy in place for when they are no longer at the helm. As a recent TD survey found, many of those who do have a succession plan say they want to eventually pass their business on to their children, but only half have actually discussed this with them.
"With so many things to think about when starting and running a small business, it's understandable that planning for the day you step away from it isn't always top of mind," said Dave Kelly, Senior Vice President, Private Investment Advice, TD Wealth. "But a succession plan can help you to maximize the value of your business when you do eventually hand over the reins, and the time to set up that plan is long before you actually retire."
Kelly notes that a succession plan is more than just identifying who will take over your business – whether you transfer it to a family member or sell it to a partner, your employees or a third-party. You also need to consider factors like the tax implications of transferring your business, who will manage day-to-day operations, and how to maintain stability and preserve family harmony when bringing in a successor. This could involve having an estate equalization strategy to help ensure that all family members are treated fairly, even if they don't take over the business.
"As a small business owner, you should talk to your family about your succession plans to make sure everyone understands what you want and why, and to find out if your family actually wants to take over the business at some point," he said. "You should also discuss your plans with professional advisors, including a business succession advisor and your financial advisor, so they can help you structure your business and your succession plans."
Kelly suggests small business owners set up a succession plan as early as possible and review it regularly to make sure it remains up-to-date, particularly as your business grows and to take into account significant life events that could impact these plans, including marriage or divorce, and the birth or death of family members.
Here are some other tips for business succession planning:
- List your goals and priorities. Some questions to ask yourself include: When do you want to hand over the reins to your business – at retirement age, or earlier so you can pursue other business or personal interests? How important is it that someone in your family takes over the business and consider whether they would even be interested, or would you prefer to sell it? Don't forget to include your family in these discussions.
- Assemble a team of specialist advisors. Beyond the usual list of advisors – such as financial advisors, lawyers and accountants – consider adding a family facilitator to help you navigate the details of a family business succession plan and preserve family harmony.
- Review your succession plan "action items". Draw up a list of things to do to make your plan work, such as whether you need to change your business structure (from a sole proprietorship or partnership to a corporation, for example), what additional training or experience your chosen successor needs, and whether you need an estate equalization plan to help ensure the interests of other family members who don't enter the business are considered.
- Develop the most appropriate plan for you. Every family business is unique, so there is no one-size-fits-all succession plan. Take the time to develop the one that's right for your business and your family, factoring in your personal and business goals, your family situation and the specific details of your business. And once it's in place, review it regularly and update it whenever necessary so it always meets your – and your family's – needs.
For more information, tools and resources on business succession planning, visit http://www.tdwaterhouse.ca/products-services/investing/private-client-services/business-succession.jsp
About TD's Taking Care of (Family) Business Poll
TD commissioned Environics Research Group to conduct a custom survey of 582 Small Business Owners within a broader sample of 6,015 Canadians aged 18 years and older. Responses were collected between February 11 and 25, 2014.
About TD Wealth
TD Wealth represents the products and services of TD Waterhouse Canada Inc., TD Waterhouse Private Investment Counsel Inc., TD Wealth Private Banking (offered by The Toronto-Dominion Bank) and TD Wealth Private Trust (offered by The Canada Trust Company).
About TD Bank Group
The Toronto-Dominion Bank and its subsidiaries are collectively known as TD Bank Group ("TD" or the "Bank"). TD is the sixth largest bank in North America by branches and serves over 22 million customers in three key businesses operating in a number of locations in financial centres around the globe: Canadian Retail, including TD Canada Trust, TD Auto Finance Canada, TD Wealth (Canada), TD Direct Investing, and TD Insurance; U.S. Retail, including TD Bank, America's Most Convenient Bank, TD Auto Finance U.S., TD Wealth (U.S.) and an investment in TD Ameritrade; and Wholesale Banking, including TD Securities. TD also ranks among the world's leading online financial services firms, with approximately 8.8 million active online and mobile customers. TD had CDN$922 billion in assets on July 31, 2014. The Toronto-Dominion Bank trades under the symbol "TD" on the Toronto and New York Stock Exchanges.
SOURCE TD Canada Trust
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