Most of the succession conversations I have with business owners start from a familiar place. There is a founder, or a small group of partners, who built something valuable. They are approaching the stage of life where they want to step back. And the question becomes: what happens next?

But there is a version of this conversation that almost nobody is having, and it deserves more attention. What happens when you have already solved the succession question once - through a management buyout, an employee share program, or some form of internal ownership transfer - and the structure that got you here is no longer the structure that will take you forward?

This is exactly what happened at Taproot.

Taproot is a national social enterprise that has been operating for over 40 years, providing children and youth services and support for adults with diverse abilities across British Columbia, Alberta, and Northern Ontario. It employs roughly 775 people and generates over $65 million in annual revenue. When the original founder decided to exit nearly two decades ago, he had interest from U.S. private equity firms and real estate buyers. He turned them all down. Instead, he sold it to seven employees who believed in the mission and were willing to pay him out over a number of years.

That was a successful exit. It preserved the culture. It kept the mission intact. And over time, the ownership group expanded from seven shareholders to 30. By all appearances, the succession problem had been solved.

Except it had not. Not fully.

Those original major shareholders were approaching retirement. They needed liquidity. And the question resurfaced with a new layer of complexity: how do you transfer ownership broadly across an organization of nearly 800 employees when the existing structure was designed for a small group of individual shareholders?

The board explored the options you would expect. Another management buyout. Private equity. Gifting share certificates to employees. Trust company arrangements. Each one came with tradeoffs that undermined what mattered most to the organization. Private equity conflicted with the values. A second management buyout would simply restart the same cycle. Gifting shares to 800 employees would create an administrative burden that was unsustainable - every time someone left or joined the company, shares would need to change hands, and someone would need to manage that clearing house indefinitely.

This is the part of the story that resonates with me as a wealth advisor. A founder does the hard work of building an exit plan, executes it well, and then assumes the problem is solved permanently. But businesses are living things. They grow. The people inside them change. The ownership group ages. And if the structure does not evolve alongside the organization, the same succession pressure comes back - sometimes with more urgency and fewer options.

Taproot's breakthrough came from an unexpected place. Their CEO, Mike Fotheringham, heard a podcast about Employee Ownership Trusts while driving to visit staff on the coast. He shared it with the board. They connected with Rewrite Capital Advisors, who ran a feasibility study. And the board made the decision to move forward with what became Canada's largest EOT transaction - transferring 100 percent of shares into a trust held on behalf of all employees.

What struck me most in our conversation was not the structure itself, though it is elegant. It was what the EOT solved that other approaches could not. Robert MacDougall, a board trustee who guided the transaction, described the EOT legislation as a template. It provided parameters, guidance, and a framework for designing the transition - something the other options lacked. It answered questions that previous structures left open: how shares are held, how governance works, how employees participate without creating administrative chaos, and how the organization can continue to grow and bring new people in without rebuilding the ownership model every generation.

The other insight that matters here is cultural. Taproot did not flip a switch on transparency the day the deal closed. They had been running quarterly all-staff financial updates for two years before the transaction. Employees were already accustomed to hearing how the business was performing - revenue, expenses, strategic priorities. So when the announcement came that they were now owners through the trust, it was an extension of something that was already being practiced.

That preparation is the piece most business owners underestimate. Whether you are considering an EOT, a sale to a third party, or a generational transfer, the cultural groundwork matters as much as the legal and financial work.

So here is the question I would put to any business owner who has already gone through some form of succession or internal ownership transfer: is your current structure built to last, or is it built for the people who happen to be in the room right now? Because if the answer is the latter, you have a temporary arrangement rather than a true succession plan. And temporary arrangements have a way of becoming urgent at exactly the wrong moment.

The first succession plan is rarely the last one. To navigate this well you’ll need to treat ownership design as an ongoing discipline, not a one-time event. Revisit the structure as the organization grows. Ask hard questions about what happens when the current owners want out. And start those conversations years before the pressure arrives.

If you are an owner who solved the succession question once and has not revisited it since, now is a good time to look again. Book a one-on-one Wealth Gap Analysis with me and let us examine whether your current structure is serving your future - or just preserving your past. Reach out on LinkedIn - Colleen O’Connell-Campbell - or email me directly.

TTFN (ta ta for now),

Colleen O'Connell-Campbell

*RBC Dominion Securities Inc.* and Royal Bank of Canada are separate corporate entities which are affiliated. *Member-Canadian Investor Protection Fund. RBC Dominion Securities Inc. is a member company of RBC Wealth Management, a business segment of Royal Bank of Canada. â / ™ Trademark(s) of Royal Bank of Canada. Used under licence. © RBC Dominion Securities Inc. 2024. All rights reserved*