Business Transfer in five steps

While each situation is unique, there is a process that makes it possible for you to choose and implement the best possible solution. Your transfer manager, together with your Commercial Banking manager, will help you achieve your goals, and ensure a smooth transition by following these five steps:

 

1. Determine your objectives

First of all, with the help of your transfer manager and your Commercial Banking manager, you should determine the objectives that will guide you through the transfer process.

Why define your objectives?

Doing so lays the foundation for your planning. This will facilitate the rest of the business transfer. Approach it objectively, candidly and realistically. The time you invest here will be amply rewarded.

What should you do during this step?

You should answer several important questions that will have a decisive impact on your future and that of your company. Here are a few examples.

  • Do you want to withdraw entirely from managing the company?
  • What would you like your income to be over the next 10, 20 or 30 years?
  • Who would you like to take over your company?
  • Is your company’s long-term survival important to you?

What resources are required?

At this stage, an informed outside opinion can help you think more clearly about your financial future. This is why the advice of a Private Wealth 1859 private banker is well worth obtaining. Your transfer manager and Commercial Banking manager can arrange an initial meeting and even attend it with you.

2. Choose your successor

Who will take over? This is certainly one of the trickiest questions in any business transfer process. Fortunately, there are paths that you can explore to help you find the right answer.

What should you do during this step?

You have many options at this stage. You can consider selling the business to family members, key employees or an outside party. Your thinking should focus on the following aspects:

  • The personality and skills of the desired successor
  • The impact of your choice of successor on the company’s selling price
  • The possibility of selling to a competitor
  • Identifying potential candidates
  • Meeting and evaluating candidates

What resources are required?

Human resources and management professionals can facilitate this step. Your transfer manager and Commercial Banking manager can recommend specialists in your region.

3. Evaluate your business

Once you've chosen a successor, it's crucial to establish the selling price, and complete the financial planning process. To do so, you need an objective valuation of your company.

What should you do during this step?

When determining the value of your company, you can use one of the following three approaches:

  • Valuation based on asset value
  • Valuation based on the selling price of comparable companies
  • Valuation based on cash flows

Each approach has its advantages. Your transfer manager, together with your Commercial Banking manager, can advise you in this regard.

What resources are required?

The support of a business valuator and an accountant can be a major plus during this important step. Your transfer manager and Commercial Banking manager will be pleased to recommend such specialists.

4. Develop a succession plan

So you’ve established your financial objectives, chosen a successor, and determined your company’s worth. The time has come to develop your succession plan (also called a transition plan).

What should you do during this step?

Preparing your succession plan is a key step that will help ensure a successful transfer of leadership (also called the transfer of management). Thoroughness and organization are mandatory in developing the plan. Above all, the plan must be clearly explained to everyone it will affect, both inside and outside the company.

This extremely important plan should provide answers to the questions below:

  • Do you need to create a transition committee? If so, what will its role be?
  • What are your expectations? What are your successor’s expectations?
  • Do you want to continue working in the company as an advisor or member of the board of directors?
  • Do you plan to recognize the contribution of your key employees through a profit-sharing plan or other means?
  • Will your successor require training or coaching?
  • What will be the timetable leading to the arrival of your successor?

A succession plan can have a timeframe of several months or even a few years, and rigorous follow-up is required. The plan should also be updated from time to time to reflect changes in the company and the markets in which the company does business.

What resources are required?

Human resources and management professionals can help you successfully complete this step. Your transfer manager, together with your Commercial Banking manager, can recommend such specialists.

5. Transfer ownership

In this final step, you and/or the buyer choose the best way to finance the transfer, taking into account the taxation, financial and legal implications.

What should you do during this step?

You have several options at this stage, depending on whether you have decided to sell your company to family members, key employees or an outside party.

  • Transfer to family members or key employees may require financial planning and estate planning.
  • Transfer to an outside party involves selling the company’s shares or assets, each of which has a different tax impact.

The issue of financing will also need to be addressed at this stage because corporate acquisitions rarely occur without some form of financing. To ensure the success of this crucial step, the financial products offered by National Bank may prove extremely useful.

What resources are required?

Your transfer manager, together with your Commercial Banking manager, can propose solutions that will satisfy you, the new owner and your business.