Many lack framework to tackle this important and often emotional issue

TORONTO, Oct. 19, 2011 /CNW/ - Canadian small and medium-sized business owners are putting the financial health of their companies - as well as their personal net worth - at risk by ignoring the need for a succession plan, says CIBC's head of Business Transition Planning, Sean Foran.

"For many years now it's been common knowledge that a majority of small business owners are not planning for the succession of their business," says Mr. Foran. "The reluctance to let go often stems from the fact they lack a framework to approach this potentially emotional decision around what's next for them and the companies they built."

He notes that the average small and medium-sized business owner in Canada is pushing 60 years old, making succession planning one of the most important decisions facing businesses in the country today. Nearly two-thirds of Canadians who work in the private sector are employed by small and medium-sized companies.

"Clearly Canadian business owners are having difficulty finding the exit," says Mr. Foran. "They need help confronting this emotional decision around whether to keep or sell their business. Our feedback from clients is that having a framework that isolates the key success factors in the decision is critical to starting the transition process."

Mr. Foran offers the following four points for business owners to consider.

Consider the future leadership needs of the business.
There are essentially three forces at play in Business Transition Planning - the family involvement in the transition, the desires of the shareholders around successor ownership and leadership, and the needs of the business itself. Asking what the business itself needs from a new leader can provide the objective criteria for the selection of a successor or best exit strategy for the owner of the business.

Identify a capable successor and prepare them to take over.
The research on family businesses tells us that in order to truly let go, a business owner must put trust in a willing and able successor. Successors don't become willing and able overnight. They need adequate preparation and need to see that the owner will begin to let go of increasingly important decisions. That's a key driver of successful succession. Ask your successor if he or she feels prepared to take over your role. You may be surprised at the answer.

Understand where the business sits in the competitive landscape and your available resources to keep it growing.
Business owners should regularly analyze their business to determine its place in the competitive landscape. Knowing where the business sits and how well resourced it is in terms of the financial and managerial resources of the business and the emotional resources of the business owner are critical factors in deciding whether to keep or sell the business.

Emotional resources reflect the commitment of the owner and family to continue to invest or re-invest in the business after the owner is no longer actively running the company.

If you are not confident about your emotional, financial and managerial resources to keep the business in the family, maybe it's time to let someone else take the business to the next level.

Don't overstay your time in the corner office - leave at the top of your game.
Many business owners leave their succession and transition planning too late, curtailing their exit options. Investing in strong tier-two management is really an investment and not an expense. Teaching others to do what the owner has historically contributed to the business is an investment in the owner's future freedom and is a critical success factor in a successful transition whether the business is to transition to a successor within the family or to a third party.

"As small and medium-sized businesses represent some $600 billion of Canadian GDP, understanding these critical success factors and a framework for deciding on the appropriate exit strategy are key to ensuring stable transitions both for small and medium-sized businesses and the economy as a whole," adds Mr. Foran.

CIBC is a leading North American financial institution with nearly 11 million personal banking and business clients. CIBC offers a full range of products and services through its comprehensive electronic banking network, branches and offices across Canada, in the United States and around the world. You can find other news releases and information about CIBC in our Press Centre on our corporate website at cibc.com.