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Selling your business 5 min read

Selling or succession: Deciding whether to sell your business or pass it on to your kids

More business owners are starting to think about the next phase of their life – a phase that doesn’t have the business at its very centre. While you might think passing it on to your kids is the logical option, they may have other ideas and abilities. Selling it may be the best way to preserve your wealth for generations to come.

Deciding whether, when and how to exit their company is perhaps the most important and daunting challenge business owners will ever face, and more and more of them are grappling with it today. According to a survey by the Canadian Federation of Independent Business1, more than three-quarters of business owners are planning to exit their business over the next decade, representing a transfer of wealth amounting to more than $2 trillion.

That is a considerable ground shift in the Canadian business landscape, and Samuel Chinniah, Sr Family Office Advisor, Financial Planner & Associate Portfolio Manager for CWB Wealth, says he is already seeing evidence of it among the business owners he advises. While demographics undoubtedly play a part as baby boomers enter retirement age, Chinniah thinks the pandemic may also have a role. “Coming out of COVID-19, many business owners have a different mindset,” he says. “They’re more ready to move on to the next phase of their lives.”

A complex process

Exiting a business, whether by selling the company or passing it on to children, can be a complex process, involving retirement planning, estate and tax considerations, and perhaps operational and accounting changes within the company. And for the many independent businesses that are family enterprises, intergenerational dynamics can come into play. Throughout an owner’s exit journey, CWB can provide financial advice and planning for life post-exit to lending support during the sale (including expertise from unique transaction advisory service firms in CWB’s network) and strategic, long-term wealth management. A holistic approach allows CWB to leverage expertise across its teams and business network to help take the fear and anxiety out of a profoundly significant professional and personal event.

Chinniah, who is often an early sounding board for family business owners thinking of exiting, says that before they begin the process, they need to address a fundamental question: Do they want to exit the business through merger or acquisition (M&A), sell all or part of the company, or do they want to pass along control and/or ownership to the kids?

It’s usually not an easy decision. After years of dedicating their time, money and hard work to a company’s success, entrepreneurs often find it hard to let go. As well, a business owner’s hopes and dreams for their children often get tied up in the decision-making.

Taking emotion out of the decision

Chinniah says that a good first step is trying to get wealth—and emotion—out of the business. “We often see entrepreneurs with 99 per cent of their wealth tied up in the business, so we like to develop a financial plan to build a separate line of assets,” he adds. “That way, the owner not only knows they have enough money to get by no matter what happens to the business, but they can also cut some emotional ties to the company and start thinking about the most important issue, which is how to maximize its value as an asset.”

The goal is to encourage a clear-eyed assessment of the best approach to exiting the business for the company, the owner and the family. Chinniah says that some owners have outsized expectations for their children as businesspeople— they assume that the kids are interested in taking over in the first place. If they are, “it’s up to you as the owner to decide: Can they really handle it? Do they have the skills and the drive?” he explains.

“It’s often a mistake to assume that your children will work just as hard as you. Not everyone has the same passion or interest that you have as a founder.”

Taking the time you need

When children do have an interest, CWB Family Office Services can work with the owner to bring in consultants and business coaches to give them the training and mentoring they need to succeed. In some cases, Chinniah recommends that they gain some experience outside the family business— perhaps even with a competitor—to round out their skills and knowledge.

That time is not just a training period, but also an evaluation period. At the end, the children may still not be ready to assume control. Or they may decide that running a business is no longer for them. “All of this takes time,” notes Chinniah. “And what the parents wish doesn’t always fit with the children’s ambitions.”

Considering all options

He emphasizes that no matter how much owners and their children may want to keep the business in the family, they should have an open mind and seriously consider the option of selling.

In many cases, “the best thing you can do for your kids is build the business up to maximize value, sell it and give the assets to the kids,” Chinniah says. “It’s a much more secure option, in terms of preserving wealth, than just leaving the business to the kids and potentially have them run it into the ground.”

Selling the company and distributing the proceeds among children can be a relatively simple way for an owner to treat multiple children equally—and to prevent family squabbles about the running of the business. Plus, there are tax-efficient ways for children to receive the proceeds of a business sale, such as estate freezes and family trusts, Chinniah adds. Among other benefits, these strategies can multiply the lifetime capital gains exemption across family members.

But whether a business owner decides to sell or pass the company on to children, one factor is vitally important: time. Transferring control and ownership of a business to children requires thoughtful planning; selling a business at maximum value requires time to enhance profitability and prepare assets for a tax-efficient sale. In either case, early exit-planning can pay dividends down the road.

“You really want to give yourself a minimum of two years to plan your exit, but the longer, the better,” Chinniah says. “The earlier you begin the inevitable process, the more options you have available.”


1. Over $2 trillion in business assets are at stake as majority of small business owners plan to exit their business over the next decade (