7 questions to begin building your transition plan

For every business, no matter its age, transition should always be top of mind, experts say.

As a core part of your business plan, transition plans ensure stability during periods of change. When the plan is integrated into your business plan, other partners, family members and senior staff have peace of mind and know the path forward.

“I think the best practice is to always be thinking of succession,” says Jennifer Dunn, a Partner in the Charlottetown office of BDO Canada, adding she likes to keep in mind that someday, a business will be sold.

Involuntary situations, including death, illness or disability, may result in an unanticipated sale of the company. Developing a structured plan early in your business’ life can provide peace of mind when a sale of the company is unplanned. Transition plans provide an approach to managing the changeover, ensuring that the company's and its stakeholders' interests are protected while also helping position the business and new ownership for future success.

Dunn says that at the bare minimum, transition plans should be in place three to five years before a business owner considers selling. However, it is often difficult to predict when your business will transition.

"Transition plans act as a road map, and it will help to identify the goals of the business owner, including clarifying roles and responsibilities and mitigating risk," Dunn says.

Why you need a transition plan

Conversely, failing to put a transition plan in place exposes a business to numerous risks that could impact its overall operations, financial stability, market position and long-term viability.

"Some of the risks include operational disruptions, loss of key personnel, cash flow issues, reputational damage and lack of clarity about leadership roles and responsibilities," Dunn says. "And in a worst-case scenario, the lack of a transition plan can lead to business failure."

Here are the top 5 benefits of having a transition plan: