My name is Mark Goodfield. Welcome to The Blunt Bean Counter ™, a blog that shares my thoughts on income taxes, finance and the psychology of money. I am a Chartered Professional Accountant. This blog is meant for everyone, but in particular for high net worth individuals and owners of private corporations. My posts are blunt, opinionated and even have a twist of humour/sarcasm. You've been warned. Please note the blog posts are time sensitive and subject to changes in legislation or law.

Monday, February 9, 2015

Business Transition Planning

Planning the succession of your business is the most vital undertaking for any small business owner. When this planning involves family, the emotional and financial stress can be overwhelming.

Today, Grant Robinson of The SucessCare Program is my guest poster. Grant is one of the most respected advisors in the area of transition planning for business and family succession.

Over the last couple years, I have been told on several occasions that based on my integrated practice of accounting, income tax, wealth management and consulting, I should attend Grant's course on succession planning. I had it on my list of things to do, but never got around to it. It is really too bad I did not, as I have now gotten to know Grant and he is one of the most dynamic accountants I have ever met (yes, I know, being a dynamic accountant is not saying much, but in this case it is).

If you are a consistent reader of mine, you know that I do not compliment or endorse easily. However, if you have business succession issues and cannot seem to get out of the quicksand, I would give Grant a shout. Enough good things about Grant, let’s get to his guest post, that somehow ties in cars, highways, and succession planning.

Exiting The Business Highway

By Grant Robinson

As the owner and CEO of your business, your primary role is to move the business forward. You drive in the fast lane, covering as much distance as you can in the limited amount of time available.

Yet you know that you can’t stay in the fast lane forever. At some point you will run out of gas!

Don’t wait too long. The exit ramp is on the opposite side of the highway and it’s dangerous to cross a three-lane highway at the last minute. You’ve seen others cause some serious collisions ― some involving their own family members.

It’s much safer to gradually move over to the exit ramp one lane at a time and allow your junior driver to get the necessary experience before taking over in the fast lane.

There are some key things to know and do to ensure you change lanes safely.
  • Yes you still need to run a good business by monitoring the traffic conditions and anticipating the roadblocks. It is vital that you are continually aware of possible bridge-outs in your marketplace or industry, and at the same time look for opportunities to diversify via a new highway.
  • But before making any moves, you also need to signal your intentions through good communication with the next generation management and family members. Good communication will help ensure each stakeholder is going the same direction and knows what to expect. It is also critical that you check your blind spot by preparing for all contingencies.
  •  Finally, you need to be in position well before that exit ramp appears. This means having a plan that preserves and protects the equity you have built up over the years and clarifies how those assets will eventually be distributed.
An integrated transition plan will ensure you address all three of these key components of a business transition.

The Integrated Transition Plan

An integrated transition plan is a focused approach to addressing the inevitable changes to the leadership and ownership of your business.

Over the years you have amassed much more than mere physical assets. Your business, your family and your community all benefit from a number of equally important, intangible assets. Preserving and transitioning both the tangible and the intangible is the foundation of an integrated transition plan.

Consequently, transitioning a business involves much more than transferring the shares of the business. It’s about ensuring the business can not only survive without the current leader but has the ability to thrive under the new leadership. It’s also about ensuring that the family remains connected, regardless of whether you decide to pass the baton to one or more next generation members or sell to a third party.

To help you prepare an integrated transition plan you must meet the needs of three key areas of your business:
  •  The Family or Personal area which focuses on the continued support of individuals, the family unit and other stakeholders such as employees and their families;
  • The Ownership area which centers on the preservation of the physical capital entrusted to the shareholders; and
  •  The Business area which is responsible for building and maintaining the wealth engine that generates the wealth for the stakeholders. 
In the Family/Personal area, your plan focuses on developing a long-range vision that clarifies your direction and purpose for the next 120 months (or two car lease renewals keeping with our car theme). It builds on your guiding principles and philosophy to sustain and grow the social capital that is so important to both your family or partners, and the continuity of your business. This social capital includes intangibles such as your reputation in the marketplace among customers and suppliers alike. It includes the culture that keeps your employees engaged and committed. And it serves to keep your family nurtured, connected and supportive of one another. Essentially, you have a plan that defines the legacy you will ultimately leave your family and your community.

In the Ownership area, your plan should prepare both the exiting and succeeding generations for the transition of the physical assets. In order to adequately protect these assets, you must first clarify the overall ownership philosophy and put the wheels in motion to develop the appropriate ownership structures and agreements.

In the Business area, the objective is to keep the wealth engine running and determine what needs to be done to ensure the business can continue to be profitable beyond a change in leadership, and at the same time attractive to a prospective buyer. This plan includes processes to professionalize the management system, groom the next generation leader(s), transfer the knowledge and relationships to the new leaders, and ultimately affirm that the business can thrive without the current decision-maker.

Planning a business transition is just like managing any other project except that the outcome of this project is critical to the future of many people. Success is dependent upon the right investment of time and resources.

Any business owner who has successfully transitioned a business will acknowledge that it takes a long time ― possibly as much as five years or more ― to put processes in place that enable the business to run successfully under new leadership. Unfortunately, the majority of business owners believe they can wait until they are almost ready to retire to begin planning their exit. It’s not surprising that there are so many collisions on the highway as they try to move to the exit ramp when that fuel warning light comes on.

For many, transitioning a business is a “once in a lifetime” journey. It’s a new and different challenge that requires a roadmap or a GPS. You must go beyond the technical aspects of a share transfer. You and your family need to articulate what you want in order to help you through the process of developing the strategies to get there.

Grant Robinson is a business transition specialist and National Director of The BDO SuccessCare Program, a unique program for businesses and families who want to create greater choice around the future transition of their business and wealth. You can reach The BDO SuccessCare Program at 1 800 598 6400.

This site provides general information on various tax issues and other matters. The information is not intended to constitute professional advice and may not be appropriate for a specific individual or fact situation. It is written by the author solely in their personal capacity and cannot be attributed to the accounting firm with which they are affiliated. It is not intended to constitute professional advice, and neither the author nor the firm with which the author is associated shall accept any liability in respect of any reliance on the information contained herein. Readers should always consult with their professional advisors in respect of their particular situation.


  1. Sorry this question is off topic to your post, but I'm wondering if you could answer this question.

    A guy just called in to BNN and said that in Canada if your Capital gains is more than your income that you are taxed at the full rate, not 50%.

    Is that for real?

    What if you've held a stock for over 6 years and have made $80,000 on it and wish to sell, yet your income is only $60,000?

    that doesn't seem fair at all.

    Kevin Leary didn't question him, but Kevin Leary is also not a tax accountant, to my knowledge:)]

    Thank you

    1. Hi Anon

      Cap gains are always taxed at a 50% inclusion rate, it does not matter whether the capital gains are 100% or your income or 1%.

  2. And of course no business owner looking to transition can truly execute on a strategy without at least considering whether a Personal Pension Plan can be used to extract corporate assets in a tax efficient manner...