From heartbreak to handover: how a family business saved its legacy

A key step in the succession planning process is communicating early with family, employees or other stakeholders to get their input on whether and how they’d wanted to be involved in the business’s future, Mr. Guenette says. A trusted advisor can play an important role in facilitating those kinds of discussions.

Once business owners have an idea of people's intentions, they need to figure out what training those individuals will need to prepare them for their roles and how to keep them motivated to remain with the business. 

In his own practice, Mr. Guenette built succession into the DNA of his business. Wanting to serve multi-generational families, he hired a team of advisors spanning generations and built an eight-year transition plan. The goal? Ensuring every client relationship is in good hands when he retires.

“I really had to create my own succession, and in order to do that, I had to engage the people I needed to create a successful business,” he says. “We have made business succession a part of the day-to-day operations of our business; whenever we make any significant decisions, we always take into account what impact that would have on the succession plan.”

Mr. Guenette recommends business owners work with a team of experts including financial advisors, accountants, lawyers and family enterprise specialists. Working collaboratively, they can structure the transaction in a way that supports the owner's retirement income needs and addresses tax and estate planning considerations.

If family members do decide to take over a company, business owners need to determine whether those individuals will take active management roles or delegate management to employees or external hires. If it's the former, Mr. Guenette recommends bringing kids into the business as soon as they enter the working world. 

“There’s a risk of children wandering off if they’ve never been invited into the business early enough for it to be relevant to them,” he says.

If transitioning the business within the family isn’t an option, business owners have a handful of other potential succession strategies.

Employee buyouts, where employees purchase a company, can be advantageous “if the employee group possesses the necessary skill sets and experience to ensure the continuity of the business,” he says. Buyouts can be structured either as an outright purchase and immediate change of ownership or a years-long transition.

This sort of transaction typically requires the support of a team of financial professionals to determine the structure, operations and financing necessary to accommodate the ownership change and ensure the ongoing success of the business, says Mr. Guenette. 

When neither family nor employees are able or interested in taking on the business, there are a couple of options to consider. Business owners can sell outright to an outside purchaser. They can also opt to sell off their business assets — such as real estate, equipment and intellectual property — using the proceeds to fund their retirement and support their family. They may choose to make disbursements to employees and other stakeholders. 

Even when business owners have a plan in place, Mr. Guenette says it can be difficult and emotional to step back from their day-to-day involvement in the organization. It can also be challenging to place their trust in new owners or management. Successors themselves may be going through their own emotional journeys, including dealing with fear of failure and not meeting expectations. 

Engaging a team of specialists who understand the complexities of succession planning can help alleviate anxiety and ensure a business owner can carry out their vision for the company they built and their own future. 

“A lot of business owners have their identity tied up in their business,” he says. “But they have the ability to replace it with other parts of their identity, whether it’s family [or travel] or other new ventures.”