A 2023 study by the Canadian Federation of Independent Businesses found that, incredibly, 76% of small business owners are planning to exit in the next 10 years (by 2033) yet only one in 10 (9%) have a formal business succession plan in place. If you are a business owner in the Comox Valley, it's important to give thought to a succession plan and consult with relevant experts.

Here are five questions to ask yourself:

1. Do you want to keep the business in the family, sell to a partner or employee, or sell to a third party?

If you are considering family, you will need to determine whether there is someone interested in taking it over, if they have the skills and expertise to do so, and how the rest of the family will react. Other considerations include whether you should sell the whole business or just part of it, and if you have advisors who can structure a sale.

2. What is the value of your business?

Knowing your business's value can help you set a selling price, which will help you better plan for retirement. It can also determine a fair market value, which would be used to calculate taxes if you pass the business on to family. Be sure to seek expert advice.

3. How early do you need to start planning?

Keep in mind that the succession process can take years — especially if you're looking for a third-party buyer. If you're passing it on to family, it could take time for members to get ready for the responsibilities.

4. Do you understand the tax impact?

Be aware that the tax impact is likely going to be a factor in the choices you make. There is more than the purchase price to consider; the real bottom line is the after-tax funds you retain after the sale. Tax planning ahead of time may offer you more flexibility in negotiating the terms of the sale, and allow you to end up with the after-tax cash you expected.

5. Will you have enough money for the next stage of your life?

Many business owners find it hard to picture daily life without their business. Before you wind it down, take the time to think about how you want to spend your hours in retirement, and if your succession plan aligns with your wealth and estate planning goals. If you're not sure, a trusted financial planner can help you clarify your vision.

About Lara Austin

Lara Austin is a Portfolio Manager and Wealth Advisor for RBC Dominion Securities in the Comox Valley. She believes that financial literacy along with transparency, trust, and diligence to detail is a cornerstone of successful client relationships. For further information about this topic, she can be reached at lara.austin@rbc.com or at 250-334-5606.