Owners need to think about their exit strategy before death or a major health event forces the issue, said Tom Deans, business wealth expert and best-selling author, who spoke at a recent Mississauga Board of Trade event sponsored by Standard Life.
When it comes to selling their business, small business owners really only have two options, Deans explained. The first is to gift the business to their children—which, in his view, is the worst choice.
“At the age of 13, my father asked me whether or not I wanted to purchase shares in his business,” said Deans, explaining that it’s important to get your children involved in—and committed to—the business, rather than giving it to them for free.
The other option is to sell it: to family members, employees, competitors or a financial buyer, such as a private equity fund. Emotionally, it can be hard for business owners to imagine someone else at the helm of their pride and joy. However, “every business is sold—the question is how and when,” noted Deans, adding that “selling a business does not mean selling out.”
He encouraged business owners to think now about what their last day will look like. For example, imagine the business is always for sale. Make sure there is a strong management team in place. Create a transition team to manage future change.
Compensation and benefits programs play an important role in retaining employees and keeping them “switched on,” explained Deans. A 2012 survey of 400 officers and 600 employees at small and medium-sized enterprises (SMEs), conducted for Standard Life by Environics Research Group, finds that two-thirds of employees are very concerned that they won’t be able to retire comfortably. And group savings and retirement plans rank in the top three benefits that SME employees prioritize.
“The writing is on the wall,” said Kirk McMillan, regional VP, sales, retail markets, with Standard Life. “Many SMEs are understanding the importance of pensions and benefits to their employees.”
The key takeaway for business owners is, Get your house in order. “This is your largest investment,” he reminded the audience. “What are you doing to take care of it?
This article first appeared on benefitscanada.com.