Succession planning avoids future hassles

When she assumed the presidency of the Red Deer Chamber of Commerce a week and a half ago, Maureen McMurtrie pledged to make succession planning the theme for her term. On Wednesday, she explained why.

When she assumed the presidency of the Red Deer Chamber of Commerce a week and a half ago, Maureen McMurtrie pledged to make succession planning the theme for her term.

On Wednesday, she explained why.

Speaking at a Chamber Ambassadors’ luncheon, McMurtrie — a senior commercial relationship manager with Servus Credit Union — stressed the importance of planning for your departure from a business. Yet, many people fail to do so.

“I believe, and have seen through my work experience, that Albertans — and in particular Red Deerians —are well-versed in starting and growing businesses. However, given the demographic shift that is upon us as baby boomers get set to retire, I don’t believe we’ve done a good job of succession planning.”

McMurtrie speculated that people don’t want to think about their eventual exit from a business, or are intimidated by the emotional and complex nature of the planning process. But, she said, a failure to act now could result in later being forced to accept a discounted price or even shut the business down.

“With the impending demographic shift, it means there are less individuals coming behind us to take over these successful businesses.”

Plus, she added, a good plan can help ensure the transfer goes smoothly, important relationships are maintained, the business’s legacy is protected and its service to the community continues, your family’s financial security is looked after and you’re prepared for unexpected events like illness or death.

Succession planning does take time, said McMurtrie.

“A minimum of 18 months to two years, if not longer, is required to ensure your best success.”

That’s because complex issues are involved: valuation of the business, tax implications, family dynamics and ensuring continuity so that customers, employees and suppliers are not affected.

The options for succession include a transfer to family, a management buyout or a sale to a third party.

In the case of a family transfer, said McMurtrie, you should ensure family members are aware of your plans and timelines. In the case of a sale, she continued, a comprehensive valuation is needed to make sure a fair price is obtained.

Regardless, the changeover represents a critical point for a business and needs to be carefully planned.

“The transition from owner to successor is a time of great fragility, uncertainty and emotional turmoil for the business and its employees.”

hrichards@bprda.wpengine.com

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