Are you planning to transfer your business to a promising successor? Take the time to do it right, step by step, with a structured and integrated approach.
Quebec’s economy relies on a large number of SMEs. The numbers say it all: Quebec is home to nearly 240,000 businesses with less than 99 employees and another 4,300 with 100 to 499 employees. Combined, these companies account for more than 87% of all jobs in the province.
The pandemic has had serious repercussions on the economy. Uncertainty and anxiety have cast a shadow over many businesses. For a lot of entrepreneurs, the health crisis has prompted hard questions on both professional and personal matters. Work-life balance, personal success, relationships, health and wellbeing have emerged as important values.
Not to mention the fact that 35% of Quebec entrepreneurs are 55 or over, and the average business owner is 49. At this stage of a person’s working years, it’s only natural to start thinking about what comes next.
Successfully transferring a business takes time—and a plan
It’s important to take a structured and integrated approach to the entire transition process. Economic statistics show that business ownership changes fail 70% of the time in Quebec and across Canada. Moreover, just 10% of business owners have a successor in mind.
An entrepreneurial succession professional can help you make the right decisions. Their role is to anticipate potential problems, facilitate communication between all parties and help stakeholders make smart business decisions.
There are different types of ownership transfers. It’s up to you to decide which one works best for your business, employees and customers.
Ownership transfers should be gradual and involve 2 to 8 years of preparation.
Your options include:
- Transfer to a family member;
- Transfer to a company manager, employee or even the board of directors;
- Sell to a third party.
A company’s spirit is defined by the people behind it. Creating a business succession plan is like planning a road trip: you need to decide where to stop along the way in order to ensure a smooth journey to your destination. The itinerary should include pausing to consider various legal, financial, tax, strategy and human considerations.
A people-focused process
Human resources professionals can help sellers and buyers with their respective tasks in order to protect the company’s long-term viability. We recommend an eight-step process involving different stakeholders:
- Hold an initial meeting with the outgoing owner in order to gain an understanding of the business context, assess their expectations for the ownership transfer, and discuss prospective projects.
- Meet with all involved stakeholders to review the next steps.
- Conduct one-on-one meetings with each potential buyer to assess their interests and intentions.
- Carry out psychometric evaluations for each potential buyer as well as the seller if he or she plans to stay involved in the company.
- Review the test results with each respondent and hold a group meeting to share the findings while also encouraging effective communication and a culture of sharing between all parties.
- Develop a plan for onboarding the buyer(s) based on their strengths and interests, and discuss their roles and responsibilities to ensure a smooth transition.
- Present the report to the seller and discuss each party’s new roles and responsibilities.
- Provide management support and coaching to ensure the transition process is aligned with the business’s objectives, as well as those of the seller and buyers.
Each step in the process is important and gives you the opportunity to determine whether the buyer is a good fit for the company’s needs. Finding the right match is crucial for the transfer’s success. After all, just because someone wants to make it work, doesn’t mean they can. Running a business is challenging and prospective owners require certain skills, including those listed below.
Work management skills
- Initiative and action-oriented.
- Strong networking abilities;
- Effective communicator.
- Strategic vision;
- Managerial courage;
- Gets the job done.
- Stress management and emotional control;
There are various skills assessment tools available on the market, including personality tests, cognitive ability tests, in-basket tests, structured interviews, and more.
Working with a human resources advisor can help you gain a better understanding of a person’s strengths and weaknesses, and allow you to compare their profile against the company’s needs and values. This can help prevent problems down the road, while also ensuring a smoother transition for the new business owner. All of these factors are important for a successful business ownership transfer.
Interested in talking to someone about your situation? Contact us to find out more about our personalized business ownership transfer services. Our multidisciplinary team can offer the solutions you need.
This article was written in collaboration with Marie-Eve Authier, Human Resources Advisor.
17 Sep 2020 | Written by :