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Succession planning 6 min read

5 tips for building a successful business succession plan

A solid plan can take several years to implement, so it’s best to start the process now.

As Senior Family Office Advisor, Financial Planner & Associate Portfolio ManagerSamuel Chinniah of CWB Wealth has worked with hundreds of business owners to help them plan financially secure futures for themselves and their loved ones.

But he has also seen what can go wrong when they fail to prepare for the inevitable – yet often unforeseen – day when they have to leave their businesses behind.

He recalls one “brilliant, successful” entrepreneur (not a client) who spent more than a decade building his company, but never took the time to foster the next generation of management or to develop a robust succession plan.

“He was great at innovation and product development,” Chinniah says, but “he was one of those people who wanted to do everything singlehandedly.”

Still, the company did well – until the day when the founder was diagnosed with terminal cancer. “When he died, there was no business,” he adds. “The only option was an orderly wind-down of the company.” In the end, employees and the founder’s family were left with nothing.

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Passing the torch

Entrepreneurs live and breathe their companies. They pour years – even decades – of sweat equity into building their businesses. Yet the dedication that defines so many successful business owners can also come with a downside: it can blind them to the reality that one day, inevitably, they will have to exit their business.

“The company is like their baby,” says Chinniah. “They come to identify themselves with the business, and they can have a subconscious fear of letting it go.”

That fear can have disastrous consequences, but it doesn’t have to be that way. And the key to avoiding the pitfalls of exiting a business is to plan for it, with a robust and integrated succession strategy for passing on leadership and/or ownership of the company after the owner leaves.

A solid succession plan, Chinniah says, accounts for the many factors that can contribute to an owner’s decision-making about when to leave their business. For many, the goal is a financially secure retirement – but that does not always happen.

“You never know when you will have to exit,” Chinniah explains. “Bad health can interrupt your plans, or bad economic times can put your business in trouble, or you can have marital breakdown or a disability.

"If you have a good succession plan, you have figured out how to leave in three, five, 10 or 20 years. It gives you a projection for your future and a trajectory to work on.”

Family matters

Developing such strategies with clients is a task that Chinniah and his colleagues at CWB Wealth spend a lot of time doing. And thankfully, they have many examples of what can go right when business owners put a sound succession plan in place.

Chinniah cites one involving a couple who immigrated to Canada decades ago and built their own business. Over time, the company grew – and so did their family. Several of the couple’s children went on to have careers of their own, but two chose to remain in the family business.

When it came time for the founding husband and wife to think about how and when they would exit the business, they faced two big challenges: first, how to ensure the next generation would be capable of carrying on the business, and second, how to equitably distribute control and ownership of their company to children who had followed different career paths.

Working with Chinniah, the couple created a plan to address both challenges. The CWB Wealth team brought in business coaches to help the children employed by the company to develop their management skills, which allowed the owners to gradually step back from day-to-day operations. Then the couple began to pull equity out of the business incrementally and used it to seed trusts set up for each of their children. That not only brought tax advantages, but also ensured that when the owners fully exited the business, the children not involved with the company would not receive their inheritance as an ownership stake yet would still be treated fairly.

“With good tax and succession planning in place, the owners achieved their objective of transferring the business to the next generation without offending the other siblings not in the business,” Chinniah says.

“Basically, everyone was treated equally, family harmony was maintained, and the business could continue after the owners moved on.”

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Time is of the essence. Get started with these 5 tips. 

A robust succession plan like that couple’s can help owners realize not only the smooth transfer of management, but also maximization of the business’s value and minimization of the tax implications of exiting. Developing and implementing strategies to achieve those goals, however, can take several years, so Chinniah emphasizes that it is important to get a head-start. “The earlier you start planning,” he says, “the better the outcomes will usually be."


So how should a business owner begin? Chinniah offers some tips:


  1. Start the conversation: It’s important to talk with a trusted financial advisor about how and when you want to exit your business and begin to plan. Typically, a succession strategy will project a company’s value out along several timelines and delineate the steps an owner needs to take to transfer management, maximize return and minimize taxes for each one. And if you are unexpectedly forced to exit earlier than you hope to, a good succession strategy will take that possibility into account and provide a roadmap for dealing with it.

  2. Estimate your company’s value: Chinniah recommends owners put together a “spec sheet” for their business that describes the company in a short, digestible way. “If you were buying a business, what would you look for?” he says. “If someone else was looking to buy your business, how would you describe it? Do a one-pager.” A spec sheet gives you and your advisor a baseline from which to project future value, helping to guide succession planning.

  3. Consider family trusts: Properly structured, trusts can help owners distribute capital to family members in a fair and tax-efficient way upon exit. If all shares in a Canadian-controlled private corporation are held within a family trust, each family member can potentially realize a substantial lifetime capital gains tax exemption when the business is sold. The tax and legal rules for such structures can, however, be quite complex, and trusts can take many years to set up in the most effective way. As with so much else in succession planning, it can pay to start early.

  4. Make sure you have a shareholder agreement: A written agreement among shareholders about what happens and who gets what when the owners exit a business can help avoid a slew of financial, legal and emotional costs when it comes time to leave. If shareholders have a dispute, Chinniah says, “an existing shareholder agreement gives them a way to get out of it, but if you don’t have that lined up, it can make everything difficult.”

  5. Be realistic about successors: In family businesses, owners often overestimate how willing – and able – their children will be to take over. “One of the first questions I ask about children is, ‘Are they committed?’” Chinniah says. “Many of these owners have put everything they had on the table to build their business, but sometimes children don’t know what it is to sacrifice.”


In short, the factors contributing to good succession planning are numerous and complex, and chief among them, perhaps, is the time factor. The reality, Chinniah emphasizes, is that the strategies and structures needed to ensure a smooth transition can take years or even decades to implement effectively.

“People don’t realize it, but the longer they wait, the higher the cost,” Chinniah says. “And sometimes that cost can kill the company.”

Planning to get out might be the last thing busy entrepreneurs want to think about, but starting early on a succession strategy can help them avoid nasty surprises down the road.  


Samuel Chinniah is a Senior Family Office Advisor, Financial Planner & Associate Portfolio Manager with CWB Wealth. He works with executives and high-net-worth families, providing comprehensive total wealth management solutions. His expertise includes wealth management, tax and estate planning, and retirement preparation.