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Feature   August 1, 2001   by Charles Seguin and Luanna McGowan

SUCCESS & SUCCESSION: Succession Planning a Must for Jobbers

Succession planning is also the basis for proper retirement planning. Retirement is a planning process that starts when you are in your 40s and continues to well beyond retirement.

Results of a survey we conducted of Canadian jobbers revealed some startling information about the current state of succession planning among Jobber News Magazine readers.

Clearly the issue is not being addressed and the resulting risks are not well understood. With an aging jobber population, this should be the number-one planning issue for all of you, yet it appears that few have a complete understanding of what it entails.

Succession planning generally involves both management and ownership planning on a regular basis to ensure the business remains healthy and continues to provide financial support to its shareholders and employees as it has in the past. When families become involved, a third element to the decision-making process is introduced.

Family considerations add both additional complications, and often, a reason for procrastination.

For most of you, your business represents in excess of 60% of your family’s net worth. More than 70% of you own your businesses’ land and building, which acts as a form of frozen capital in that it must be sold to generate liquidity. Also, more than 65% of you have family members involved in the business.

However many of you feel that those same family members are not adequately qualified to manage the business in your absence. For this reason, while almost half of you want to transfer the business within the family when the time comes, only 16% of you feel that this is likely to happen.

The matter gets worse when you consider an unforeseen event that severely affects your ability to perform your duties, namely disability and untimely death. As many as 15% of respondents do not have a will and many more do not have adequate life insurance. Although over 75% of you have a good idea of what your business is worth, very few of you understand the financial implications of a personal disability, death or the sale of your business.

The insurance industry statistics tell us that you are 10 times more likely to become disabled than die. The probability that someone may be required to assume day-to-day management of your business is relatively high. Many business owners assume that a white knight will appear and make sure they are properly compensated for their business. Our experience tells us that the white knight often more resembles a bargain hunter and tries to take advantage of your disadvantage.

The answer is to have a contingency plan that addresses all of the financial and management issues that could have a negative impact on you and your family. The contingency plan allows you to identify and plan around events like disability and death. It gives you the opportunity to structure your affairs to your best advantage, not someone else’s, and it allows you to communicate this plan to your family, business associates and key employees to ensure it is understood and broadly known. (We’ll have more about contingency plans in a future article.)

Succession planning is also the basis for proper retirement planning. Retirement is a planning process that starts when you are in your 40s and continues to well beyond retirement. Most business owners think they will never retire and that the business will continue to be the cash cow it always has. For a few of you this may turn out to be true, but for the vast majority of you it will not. Thinking that it will gives you a false sense of security and only defers the eventual problem. The old saying ” if I only knew then what I know now” really holds true.

The good news is that you can have a significant impact on how your future unfolds. Succession planning is the tool you can use to exercise that impact. In future articles we will provide you with some of the tools and ideas you can use to start or improve your succession plan.

Like all other things that are good for you, you must commit to making this work. If you do, the rewards will be felt by not only you, but your entire family.

Succession planning is a process that evolves over time as your personal and business situation changes.

Following the correct approach will ensure that you are much better prepared when the inevitable arrives at your door.

Charles Seguin, CA, is partner-in-charge of the PricewaterhouseCoopersLLP Automotive Retail Practice. The cross-Canada practice focuses on retailer growth and development, operations improvements, succession planning, acquisitions and divestiture, accounting, tax and finance-related issues. He can be reached via e-mail at

Luanna McGowan, LLB, is partner-in-charge of the PricewaterhouseCoopersLLP Centre for Entrepreneurs and Family Business. The centre provides facilitation, strategic planning, retirement planning and wealth management services to entrepreneurs and organisations. She can be reached via e-mail at luanna.mcgowan@ca.

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