Business transfer: A seven-step guide

A business transfer is the handover of authority from one administration to another. It can take various forms, but it always represents a significant change for the people involved. 

This process involves legal, tax, and financial considerations as well as personal ones. After devoting a significant portion of your life to building your business, the prospect of handing over the reins to the next generation can stir strong emotions. 

Perhaps you’re counting on the sale of your business to provide a comfortable retirement. That’s all the more reason to plan carefully and secure the best possible deal. You need to calculate how much you’ll need for retirement and make sure your business is worth that amount. 

Here are seven steps to help you manage the transfer of your business.

It can take several years to sell or transfer a business, so it’s important to be prepared. Not only will this protect the business’s long-term viability, but it’ll also make sure it ends up in good hands. 

Here’s why you should plan ahead: 

• By taking the time to prepare your business for sale you increase your chances of getting a better price. You’ll receive more offers and have the freedom to choose the one that suits you best. 
• If you’re transferring a family business, a good plan will help avoid potential friction within your family.
• By planning a transition period, your successor will be better equipped to take on their new role and will have time to immerse themselves in your company’s culture and values as well as your ways of doing things. They’ll be even more committed if they have a clear vision of the plan and the steps that lie ahead.
• You may be able to minimize the tax implications of the sale and thereby maximize your personal wealth.
• The longer you delay selling, the higher the risk of having to accept less favourable terms such as receiving a lower price due to adverse market conditions or losing control of your business due to health issues.
• You’ll have time to assemble a team of specialists and coordinate their efforts to make the most of their various areas of expertise – whether in financing, taxation, law, valuation, financial planning or managing the human side of things.

Even if you aren’t thinking of retiring anytime soon, it’s a good idea to start planning several years in advance to avoid any unpleasant surprises.

With the help of specialists such as your account manager, transfer manager or financial planner, determine what’s driving the transfer of your business. Identify what you want from a financial perspective as well as how you envision the future from a personal standpoint. This reflection will serve as the foundation for your succession or transition plan and will make the process easier moving forward. 

Ask yourself the following questions and answer them as objectively as possible: 

• Would you like to remain involved in the management of your business, or step back completely?
• What do you need to earn over the next 10, 20, or 30 years?
• How much do you need for retirement?
• Do your financial and estate plans take the business transfer into account?
• Who will you entrust with the new leadership of your business?
• Is the long-term success of your business important to you?

Who will take the reins after you leave? This is one of the toughest decisions you’ll have to make during the transfer process. You might consider selling to family members, employees, or another company. 

It’s important to make the choice that’s best for you and reflects your values and goals. To help you think this through, ask yourself the following questions: 

• If you have children, did you build your business with the expectation that they would take over?
• Do you want to maximize your profits?
• Do you want to ensure the long-term survival of your business, even if that means excluding family members?
• Does your successor have sufficient cash flow to realistically support the transfer process?
• Would you agree to move your business abroad?

These are complex matters. As always, experts can contribute to the discussion and identify potential blind spots. 

Among the various scenarios, consider:

• Members of your staff: You could transfer your business to executives or managers within your organization. These individuals are familiar with your teams and day-to-day operations, which could make the transition easier.
• Your loved ones: If you’re transferring your business to your children, your main challenges may be on a personal level. You’ll need a solid succession plan and will have to make arrangements for sharing your knowledge. Above all, you’ll need to ask yourself whether your successor has the qualities required to run your business. Expect difficult discussions and consider organizing a family meeting facilitated by specialists. If you have multiple children, you’ll need to address the issue of fairness, particularly if some aren’t included in the succession plan.
• Both options: A good compromise could be to transfer your business to both family members and your employees.
• Another company: A competitor or a foreign company, for example, could take over your business. This option raises other issues, such as restructuring, layoffs, and even the liquidation of your business.

Once you’ve identified a list of potential successors, take the time to meet with them and evaluate their suitability based on the criteria you deem important. Depending on the context, you may be looking for someone with experience managing the finances of an SME or who has the connections to secure private financing.

No matter how much planning you do, transferring a business is a project that can change along the way. Your successor may change their mind, market conditions may suddenly become less favourable and other unforeseen events may throw a wrench in your plans. This is all the more reason to rely on the expertise of specialists at every stage. You’ll need advice on labour law, taxation, and finance, among other things.  

Your account manager can guide you through this process. Thanks to their experience, attentive listening, and network of contacts, you’ll receive all the support you need. After all, a business transfer comes with its own set of emotions.