he pandemic has brought hardship and important lessons in survival for small and mid-sized businesses across the country. Many business owners are having to make tough decisions to manage through the crisis. They are also looking to the future and what it may hold for themselves and their business in a post-pandemic reality. It’s a reality characterized by different market dynamics and the rapid shift to digital to serve evolving customer needs.
According to a recent survey by KPMG in Canada, more than a third of entrepreneurs (37 per cent) wish they could retire, transition or sell their business but aren’t prepared. Most entrepreneurs (78 per cent) said companies must go digital to compete, and 70 per cent believe a more tech savvy generation of leaders is needed to succeed going forward.
Whether you are a family business owner passing the reins on to the next generation or selling outright, preparing your business for the transition requires serious planning.
In the current climate, the normal timeframe to solidify leadership and governance structures has been accelerated. Getting a handle on what you need to know and do now will be critical to a successful business transition. Consider these six steps on your journey:
1. Plan now for the Future
Most major decisions require multi-year planning, so don’t delay. If you are a family business owner, the first step is to decide whether the business should continue as family-owned entity or will be sold to non-family members.
2. Prepare Your Business
KPMG’s survey revealed that many business owners do not have audited financial statements. Review and make sure the business’s financial records, contracts, and corporate documents are up to date and accurate, and that strong governance frameworks are in place.
3. Get a Valuation
The pandemic is impacting the valuation of businesses and M&A activity globally. You may want an independent assessment of your business value and, prior to a sale, implement operating and financial performance improvements that lead to a higher sale price.
4. Prepare Your Family
Include family members early in the planning process. Many families rely on a family office to foster communications and family unity. Consider what the transition or sale will mean to you and your family. What does life look like for you and the family after the exit? How will you oversee the family capital and financial matters?
5. Groom Your Successor
Succession planning can be one of the most challenging aspects of owning a family business, yet it’s critically important. KPMG and the Ivey Business School teamed up to create the Family Shift program, which helps prepare next-generation leaders. Many founders will continue to act as an advisor to their successor even after handing over the reins.
6. Assemble a Strong Team
Work with a team of professional advisors in mergers and acquisitions, corporate finance, tax and law who understand the current market and can help you better structure the transaction and engage with prospective buyers. Your team should be capable of taking into account all the financial and non-financial implications involved and ensure you get the best price for your business.