"Very often, they just don't know where to start," said Vincent Lecorne, President and Director of the Centre de transfert d'entreprise du Québec.
Here's a 5-step plan to get the ball rolling slowly but surely.
1. Get started at least 10 years ahead of time
If you're between 50 and 58, it's time to set a date to step down because the transition process takes about 10 years.
This time frame allows you to make adjustments. Mr. Lecorne tells the story of a business man who had passed the torch to his son. "After 2 years, he realized that it wasn't working out. So instead he turned to his daughter who was better equipped to take over."
2. Share your plans
Discuss your decision with your children, employees, customers and suppliers. This will also allow you to get an idea of their interest and motivation in taking the reins. "Above all, don't hide the news from anyone, not even your competitors."
A simple conversation can make a big difference. The president of a trucking company in Lanaudière told his sales rep that he wanted to retire. The salesperson seized this great opportunity and bought the business!
3. Surround yourself with the right experts
A successful business transfer requires a team of professionals including an accountant, an account manager, a lawyer and a tax specialist to help prepare a realistic business plan. Mr. Lecorne recommends seeking advice from a business club. The experience of other business professionals is always valuable and can contribute to avoiding similar mistakes.
4. Figure out what your business is worth
If you're planning a transfer in the next 5, 10 or 15 years, you need to figure out how much money you'll need for retirement. "If a business owner is accustomed to living on $100,000 a year, they might need $1 million to make it through the next 20 years," points out Mr. Lecorne.
Before stepping down, evaluate the building, including the material and equipment. "This step should be handled by an independent evaluator from outside the company. The process is similar to an inspection when you're selling a house."
This step shows the business owner's organizational abilities. The numbers on paper provide reassurance for future buyers.
5. Identify your potential succession
Little by little, the identity of the buyer will take shape. What happens if your heirs don't have the means or interest in the business? Mr. Lecorne suggests leaving the business to your employees. "This option is often dismissed by thinking that your workers only earn $12 an hour and could never manage to save the money needed for a down payment to buy the business."
In truth, it's quite the opposite. "If 10, 15 or 20 employees draw a set amount off each pay, the project could be quite feasible within a few years."
The Centre de transfert d'entreprise du Québec provides valuable advice. "In Abitibi, our involvement prevented employees from quitting to start a competing company."