How can you help business owners reduce the risk of transition with succession planning?


    Paniccia recommended that business owners take at least three years – five to seven years – to prepare the next generation for the family transition. Consultants can help by bringing up the issue of succession, especially if the owner isn’t talking about it. However, you can also work with the families and hold follow-up discussions over several years if you are preparing to leave.

    The BMO team supports its investment advisors. This can start with meeting the business owner and even the spouse to answer their succession planning questions. You check procedural issues such as tax restructuring, company valuations and legal documents, but then address the emotional areas of a change in management.

    “A lot of small business owners are often the business and it would stall in their absence. So we’re working with them on a key concept called “Working on versus in the Business,” ”he said. “That means really positioning the company so that it can continue to run in the absence of the owner, and that often means delegating or maintaining successors to ensure that the business owner’s skills are passed on, be it to management or the the next generation.”

    The team then goes into mitigation of the business. It checks whether the owner has a work-life balance and can take time out from business. “If the owner is always in business and unable to take a break, it is a sign of a risk that could be over-reliance on the owner,” he said. It also looks at the skills – communication, marketing or networking – that the owner has and who can move them forward in the company so that it can continue to generate cash flows when the owner leaves.

    “The key question I would ask is hypothetical, ‘If you were to spend time, say two months, outside of the business, what would happen to it?'” Paniccia said. “This is often an eye opener to those buried in the business and they quickly see the risks. If something happens to you tomorrow, what will happen to the company and thus to your family? “


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