How to Prepare Your Business Succession Plan as a Contractor

You’ve worked hard for years, built your business from the ground up, created quality employment opportunities, and supported several families. Now's the time to pass the torch and hand your business over to your successor. How can you ensure a smooth transition? What are the key factors to consider to secure your company’s legacy? Discover how you can ensure the next generation prospers within the realms of the company you built.

Business Succession: Effective Outcomes Through Early Planning

Business succession planning should start well before the anticipated handover date. Ideally, you should embark on this journey five to ten years ahead of time. This approach allows the business, seller, and successor to prepare accordingly while limiting all transition-related risks. A sufficiently lengthy timeframe means proactively finding solutions, rather than reacting to unforeseen circumstances.

When it comes to naming a successor, you’ll have to decide if you want to transfer your company over to a family member or sell it to an outside buyer. Moreover, consider the level of involvement in the business you’d like to have post-takeover to structure the transition accordingly. 

Here’s a tip shared by Richard Gauthier, former co-owner of Construction Gauthier Entrepreneur Général, highlighting the importance of succession planning in an article published on the Centre de transfert d'entreprise du Québec website:

“In my opinion, the best time to plan the sale of your construction business is when you’re sitting pretty as a contractor, and have mastered the business. That’s when you should start delegating.” (Quote translated into English by RenoQuotes)

What Does a Business Succession Plan/Program Look Like in Canada?

Appointing and Preparing the Successor

It’s essential to pinpoint the individual who’s best suited to take over the business. Whether it’s a family member, employee, or outside buyer, this decision must be based on the potential candidate's skills, experience, and vision.

Training and a Gradual Transition

Once the successor is appointed, it's crucial to provide training and streamline their transition into their new role within business operations. This might include immersing them into various departments, giving them additional responsibilities, and closely mentoring them until you decide to hand over the keys.

Financial Assessment and Structuring

On the administrative side, a thorough business appraisal is fundamental. Doing so means determining a fair selling price and planning the fiscal aspects of the transfer. The takeover's financial structuring must be meticulously planned. It’s important to consult with financial and legal experts to optimize the transaction.

Legal and Fiscal Aspects

Transferring a business consists of several legal and fiscal aspects that must be managed with care. Working with a specialized professional is highly recommended to:

• Structure the deal for financial gain

• Write up the necessary contracts and deals

• Comply with all applicable regulations

Communication and Management Planning

Open and honest communication with all concerned parties (employees, customers, and suppliers) is essential to ensure a smooth transition.

Putting together a transition plan helps preserve business stability during that time. This can include measures to maintain company culture and reassure employees.

Secure Your Company’s Future with a Succesful Succession Plan

Oftentimes, contractors wear different hats within their companies. They split their time between bidding, quoting, appraising, and managing and coordinating worksites. Given these circumstances, thinking about a successor may not be a top priority. Yet, business succession is a complex process that mandates meticulous planning and careful execution. By planning ahead, contractors can ensure the long-term success of their business under the next generation's leadership.

FAQ

What does succession mean in business?

Business succession refers to the strategic planning process business owners and CEOs undertake to ensure a smooth transition of leadership or ownership, typically in preparation for retirement or unexpected events. This involves creating a succession plan that outlines leadership changes and ensures business continuity. It applies to both corporations and small businesses, though the strategies may differ depending on the size and complexity of the business.

What is a good example of succession?

The most famous example of a successful succession plan is that of Apple by Steve Jobs. He created a groundbreaking technology company and in the hands of his successor, Tim Cook, the company was able to thrive and has continued to do so.