Transferring Your Business in Six Steps

Transferring a business is a long, complicated process that can have a major impact on your finances and retirement. Our guide offers useful information on the transfer process, including key points to consider and what type of expert can help you at each step.

Transferring your business

Advance planning for a business transfer

Many business owners don’t have a succession plan in place. Some are reluctant to take time away from running their business, while others find the prospect daunting on both a logistical and psychological level. But don’t put it off—experts agree that advance planning for a business transfer is a key aspect of sound management.

There are many advantages to having a succession plan in place

  • It increases the value of your business, as it sends potential buyers the message that the long-term success of your business is a priority.
  • It helps you foster good relationships between family members and employees, who are more likely to cooperate throughout the process if they feel included.
  • It allows your successors to step into their role more easily. By planning for a transition period, you'll help your successors better understand your organization's culture and work methods, while showing your support for the new management.
  • It allows you to better assess tax impacts on your personal assets.
  • It allows you to reduce the risk of financial instability during the transition.
Transfer objectives

Establish your goals

Start by identifying the goals of the transfer with the help of your Business Transfer Manager and Commercial Banking Manager. This will allow you to lay a foundation for the transfer and make the entire process easier.

There are many advantages to having a succession plan in place

  • It increases the value of your business, as it sends potential buyers the message that the long-term success of your business is a priority.
  • It helps you foster good relationships between family members and employees, who are more likely to cooperate throughout the process if they feel included.
  • It allows your successors to step into their role more easily. By planning for a transition period, you'll help your successors better understand your organization's culture and work methods, while showing your support for the new management.
  • It allows you to better assess tax impacts on your personal assets.
  • It allows you to reduce the risk of financial instability during the transition.
Choose a successor

Choose a successor

Who do you want to transfer your business to? This is one of the most difficult aspects of the business transfer process. At this stage, there are a number of possibilities available. You might want to sell your business to family members, key employees or an external buyer.

  • First, narrow down your choices by asking yourself the following questions about your potential successor:
    • What type of personality and skills should they have?
    • Will your choice of successor have an impact on the price your business will sell for?
    • Is selling your business to a competitor an option?

  • Next, draw up a list of potential candidates and meet with each of them to assess their suitability. Human Resources and Management experts can help you at this step. Your Business Transfer Manager can provide you with names of specialists in your area.

 

Company evaluation

Conduct a business valuation

Once you've chosen a successor, you need to set a selling price for your business and consider the tax impacts of the transfer. This means conducting an objective valuation of your business.

  • There are three approaches:
    • Asset approach
    • Market approach (your selling price compared to the competition)
    • Income approach (based on your cashflow)
  • Each approach has specific advantages. Your Business Transfer Manager, working closely with your Commercial Banking Manager, can help you identify the right approach for you.
  • Consulting a business valuator and an accountant is highly recommended at this critical step. Ask your Business Transfer Manager for recommendations.
Transfer plan

Develop a succession plan

Now it's time to draw up your succession plan, also called a transition plan. It should be drafted carefully and shared with everyone involved in the transfer, whether or not they work for your company.

  • Your plan should address the following:
    • Will you need to establish a transfer committee, and if so, what role will it play?
    • What are your expectations and those of your successor?
    • Do you want to continue working for the business as a consultant or member of the board?
    • Do you intend to compensate key employees through a profit-sharing plan?
    • Does your successor need further professional training or assistance?
    • What is your timeframe for bringing in your successor?
  • Your succession plan could extend over several months or years. Be sure to update it whenever significant changes occur within the company or the market at large.
  • Human Resources and Management experts can help you at this step. Your Business Transfer Manager can provide you with recommendations.
Transfer your business

Transfer your property

At this final stage, you and the buyer will decide how best to finance the transfer in light of fiscal, financial and legal considerations.

  • There are two options available:
    • Sell your business to a third party, which means you will sell your company shares/assets.
    • Sell your business to members of your family or key employees, which will require both financial and estate planning.
  • National Bank has a wide range of financing solutions to offer. Your Business Transfer Manager and Commercial Banking Manager can recommend the best options for you, your successor, and your business. They can also recommend tax specialists, accountants and lawyers to help you make an informed decision.

 

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