Ownership Transitions

The Equitas Transition Plan™ Q&A

Published: 2010 05 19 | Views: 3297

Transition planning for a business owner is a concept that is bandied about by so many, yet successfully done by so few.  Why that is the case is not as important as what steps should be taken to make transition planning a more successful exercise.

The Equitas Transition Planning Process™ is best explained by the following Q&A: 

Q: What do you mean by “transition planning”?

A: Transition planning is planning and providing for disposition of the business and/or liquid assets in a manner that works best for all concerned.  It includes the legal, financial, personal and family aspects of the transition.    

Q: When would be a good time to start thinking about a transition plan? 

A: The sooner you start thinking about it the better.  If you have children, you should let them see when they are young the joy and meaning in what you do.  Your teenagers can work summers in the business and should be encouraged to pursue their dreams.  If and when they are ready to work in the business, they must learn that it is a privilege, not an entitlement.

Q:  When would be a good time to start working on a transition plan? 

A:  It’s never too early, but usually about 5 years before you are ready to execute on the plan. 

Q: What does a transition plan typically look like?

A: There are four components to The Equitas Transition Planning Process™: (1) Personal Financial Planning; (2) Personal Life Planning; (3) Business Succession Planning; and (4) Wealth Transition Planning.  We generally recommend that the components of the plan be done in that order. 

Q: Why do you recommend that the components of the plan be done in that order?

A: The Personal Financial and Personal Life Plans attempt to capture yours and your spouse’s essential wants and needs for the rest of your lives.  We recommend participating in at least one or two conversations about this before starting to discuss a Business Succession Plan which typically involves children and/or senior employees of the business.  In other words, let husband and wife get their “house in order” before involving others.  The Wealth Transition Plan should follow to ensure that it reflects the prior discussions.  We have seen too many cases where people go straight to the Estate Plan which may be good at minimizing taxes but bad at capturing the essence of what needs to be done.  If this is the case, the Estate Plan may be modified after completing the first three steps to reflect those discussions.

Q: Who should we use to help us with our transition planning?

A: Usually it starts with your most trusted advisor(s) and goes from there. 

Q: Would my lawyer and accountant be able to handle all of this for me?

A: Yes, as long as they bring in others as and when required.  Lawyers and accountants are trained to provide the technical advice of the Personal Financial and Wealth Transition Plans.  Other professionals like Equitas who are expert in their fields should help with the Personal Life and Business Succession Plans.   

Q: How does Equitas help with the Personal Life Plan? 

A: Sometimes, spouses need to re-visit the “deal” they had at one time regarding retirement and what they would like to do in their retirement.  Spouses can also have anxieties about knowing where things are and what to do and who to call in the event of an untimely demise.  Equitas helps facilitate conversations around issues such as these. 

Q: How does Equitas help with the Business Succession Plan?

A: Equitas helps facilitate discussions around the keep-or-sell decision and once a decision is made helps in its execution.  If the decision is to keep the business in the family, Equitas helps with governance matters and with term sheets for shareholders agreements dealing with exit strategies.  Equitas also helps co-ordinate other professional advisors if and as required.

Q: What if I have other questions?

A: Give us a call at 613-569-7001 or email us at rprehogan@equitasconsultants.com.  


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