While almost two-thirds of Canadian businesses in the private sector are family-owned, many of them won't survive past the first generation. The reasons for this can range from a lack of interested successors to being too busy managing the day-to-day to plan for the future. Succession planning can often bring challenging issues to the surface, leading to difficult conversations with family and facing a future where you won't be running the business.

Not having any plan for the next generation also comes with significant repercussions — it can tear families apart, squander hard-earned savings, and destroy the legacy you've worked so hard to build. According to a recent report by the Canadian Federation of Independent Business, 76% of Canadian small business owners are planning to make an exit within the next decade, but less than 1 in 10 have a formal succession plan in place.

Here are 5 tips on how to build your business succession plan and keep your legacy intact.

Talk to your successors without delay

Ask your children whether they want to take over the family business. Talk to your spouse or other family members who seem like they'd be a good fit. While having these conversations — ideally as early as possible — you may also identify other successors you hadn't thought of before. It's important to keep their wishes and needs in mind as you ask them to devote their careers and lives to your legacy. Since these discussions can get heated and bring up underlying personal and family issues, consider bringing in a mediator or a family counselor.

“What should have taken two years to transition took closer to five years because my dad, like many business owners, was 'not ready,'" says Ottawa-based financial planner Gabriel Lalonde, a QuickBooks user and the second-generation owner of MDL Financial Group.

“This was combined with making sure I was ready and up for the task of taking over the reins. He always had this idea in his head that retirement would happen at the age of 65, but nobody else was aware of this."

Let go of assumptions

Don't assume that your child will agree to take over the business or that they know how to handle every day-to-day challenge. They may be driven by other motivations, have different ways of approaching problems, and face a different reality than you did. Try to walk in their shoes when coming to a consensus that everyone can agree on, and equip them with the resources they need.

“Often the family-run business is sustained more by the heart and soul and dedication of its owners, as well as (and sometimes instead of) strong systems, practices, and delegated leadership," says Erin Patchell, a strategic advisor, coach, and owner of Positivist Group, who uses QuickBooks to manage her business.

“When we're working with these businesses on succession planning, the first thing we do is build a strong vision of what their future looks like," she explains. “How involved do the owners and their family want to be? Is everyone on the same page? If not, what are the alternatives, and more importantly, what are the alternatives they can live with? There are sometimes more options than folks realize."

Create a contingency plan

Once they take over, your children may have a completely different vision for the company that you don't agree with. Or, they may end up not wanting the business after all. This possibility doesn't make you, or them, a failure. Selling or closing the business can be a better option than trying to force the business on those who don't want it, or making them deal with the fallout if you have to step aside suddenly. In this case, it's important to plan for the legal and tax implications so that you have enough funds for your retirement.

“The support we provide for succession planning could also be considered just smart business," says Patchell. “None of us know when our time is going to come. I know when my time comes, I want my hard work to be carried forward by someone who I trust."

Start your retirement planning

Handing down a business still means selling it, whether to your kids or a stranger. Either way, it's important to get a fair market value price for the business since that cash plays a major role in retirement planning for many owners.

Once you identify your buyers, decide whether the structure of your business needs to change for legal or tax reasons. Consider factors such as how you want to be paid the proceeds of the sale (such as a lump sum or in installments over time) and whether you want to keep working as an advisor to the business or make a clean break.

Gather a team of trusted professionals

Whatever you decide, start consulting with professional advisors early on to draw up all the necessary paperwork, mitigate tax implications, and determine whether your business is eligible for the lifetime capital gains exemption.

Your team should include a lawyer, an accountant, and a financial advisor.

“Over the years, we reviewed and adjusted our transition plan several times, mostly because the tax laws were changing as well as my father's vision of what the transition would look like," says Lalonde.

As a Certified Financial Planner®, Lalonde likens his role to a quarterback who gathers information from the rest of the team and pieces it together as part of a plan.

Some of the information you should expect your succession plan to cover includes:

• Type of sale (asset sale versus share purchase)
• Capital gains
• Estate freeze
• Use of trusts
• Estate equalization with other family members who may not be actively involved in the business
• Review of shareholder agreements
• Review of wills and POAs
• Role of new and old owners after the transition
• How the purchase will be funded
• Premature death or disability

While planning is essential, Lalonde cautions against relying on paperwork alone. “It's hard to capture on paper the feelings of each party involved in the succession. That's why we go beyond the technical legal, tax, and estate planning issues traditionally associated with succession planning," he says.

“Instead, we explore the human side of the process, and this, in my opinion, is the most important piece to successfully transition a family business."

Good tools free up more time so you can focus on your most valuable business asset: the people who drive it forward. Find out how solutions like QuickBooks Online can provide a good foundation for streamlining your business's finances, now and in the long term.