The Shopping List

Has the transmission process for the company been initiated?

This Shopping List is an awareness raising tool used to initiate the succession planning process.
This is by no means a test, but a tool to begin exploring, thinking and determining where you are in the process.

Most of the time this tool is used for family successions or management buyouts, but it can also be used in other situations, such as a purchase by a third party.

Even though most transitions are family successions or management buyouts, this tool can be used for other situations, such as a purchase by a third party.

The four positions from which the process can be initiated are: the owner-manager, the successor, the state of the company, and the transfer of ownership. The Shopping List can be used to evaluate the overall dynamics of the transfer by looking at the four starting positions all together, or only one or two of the starting positions.

Note that the terms "owner-manager" and "successor" can designate one or more individuals, depending on the type of succession.

The "owner-manager" designates the actual owner(s) of a business to be transferred.
The owner-manager might be a father and head of a family business, the manager of a non-family business, or a group of partners.
Ultimately it means the assignor(s).

The "successor" designates the future manager(s) and owner(s) of the company.
It might be a child, siblings, a manager or group of managers, or a combination of several types of successors.
It might even be a third party, such as an individual or business outside both the family and the company.

In this last case, certain points will seem less pertinent and will therefore affect the scores of the four dimensions. However, the score will still provide insight on at least one of the dimensions. Transferring to a third party is quicker than transferring within a family or to company management because the owner-manager does not need to prepare his successor. The acquirer's interests are mainly focused on the transfer of ownership.

It is clear that an outside successor who was never involved in the targeted company does not have access, or has only indirect and limited access, to some of the target company's information and network. The successor should consider this obstacle and how to overcome it.

* To identify the progress of the succession process is in the company you want to assign or that you would like to take over, calculate the score of the items on the Shopping List.

The resulting percentage is an indication of how far along the process is. Get started with these points!

The ratings are:

(1) Original version available in "Préparer la relève - neuf études de cas sur l'entreprise au Québec" by Louise St-Cyr and Francine Richer, Presses de l'Université de Montréal et Presses HEC, Paramètres Collection, 2003, p. 199 à 201.

1. Owner 0 1 2 3 4 5 %
The owner-manager understands the necessity to plan for business continuity. -
The owner-manager is aware of the steps involved in the transfer of management. -
The owner-manager is aware of the steps involved in the transfer of ownership. -
The owner-manager has discussed the issue with family. -
The owner-manager has consulted professionals. -
The owner-manager has selected the experts needed to guide him through the process of transferring his business. -
The owner-manager has clarified the type of succession he has in mind: family, management buyout, sale to a third party. -
The owner-manager has evaluated his financial position for retirement. -
The owner-manager has established clear criteria for choosing the successor. -
The owner-manager has identified a successor who fits the criteria. -
The owner-manager has a good idea of the fair market value of his company. -
The owner-manager is aware of the tax implications of his choices. -
The owner-manager has specific plans for retirement. -
The owner-manager has set his retirement date and communicated it to the relevant parties. -
The owner-manager has shared his vision of the future of the company with the successor. -
The owner-manager has put this vision in writing. -
The owner-manager has thought about his potential role in the company after his retirement. -
The owner-manager has considerably lessened his activity in the company. -
The owner-manager is fully retired. -
The owner-manager has prepared a will and a mandate of inaptitude. -
Total score for the owner-manager:            
0%
2. Successor 0 1 2 3 4 5 %
The successor is potentially identified, either within the family, among company management, or outside the company. -
The successor has expressed interest. -
The successor has discussed the idea with his colleagues. -
The successor has consulted the experts needed to complete the project. -
The successor knows the current owner-manager's criteria for choosing the next owner-manager. -
The successor has the appropriate training. -
The successor works for the company or for a company in the same sector. -
The successor has a decision making role either within the company or outside the company. -
The successor has his own ideas regarding the company's strategic plan. -
The successor takes on special mandates and his performance is evaluated. -
The successor has established his career plan within the company. -
The successor has established his management training plan. -
The successor has been trained by people other than the owner-manager. -
The successor has chosen a mentor. -
The successor is in contact with suppliers. -
The successor is in contact with clients. -
The successor is in contact with the bank. -
The successor has evaluated the financial resources, including the conditions, at his disposal. -
The successor has come to a clear agreement with the owner-manager on the next steps of the management transfer. -
The transfer of management is completed. -
The transfer of management is completed.            
0%
Starting the process from the company position: 0 1 2 3 4 5 %
The company is in sound financial shape. -
The company has attractive future prospects. -
The company was subject to a strategic planning exercise. -
The company called on experts for the strategic planning exercise. -
The company has identified the skills it will need to continue growing. -
The company identified the financial resources it will need to continue growing. -
The company benefits from structures that aid managers in making decisions. -
The company is equipped with a board of directors. -
The company is equipped with a board of directors that take advantage of the expertise of outside resource people. -
The company benefits from written documents concerning the orientation and strategic vision of the current owner-manager(s). -
The strategic vision has been confirmed by the board of directors and is supported, if necessary, by others, such as the family council. -
The company has clarified its ties to, and its role in, other entities, such as the family council. -
The fair market value of the company has been determined. -
The legal position of the company is clear. -
The tax position of the company is clear. -
The company will be ready for a due diligence review. -
The company is outlined in a memorandum for potential successors. -
The company can show the value of the skills of its management and employees. -
A successor is interested in the company. -
The company is equipped with a communication plan to manage rumours and employee insecurity. -
Total score for the company:            
0%
4. Starting the process of transferring ownership 0 1 2 3 4 5 %
The owner-manager has announced his intention to transfer ownership of the company. -
The owner-manager has a realistic valuation of his company, based on a fair market value confirmed by an expert. -
The owner-manager has consulted experts: chartered accountants, legal advisors, tax advisors. -
The owner-manager has reviewed several tax scenarios related to the transfer of ownership. -
The owner-manager has reviewed several financial scenarios related to the transfer or ownership. -
The owner-manager has set out his conditions and the compromises he is ready to make. -
The successor has consulted experts: chartered accountants, legal advisors, tax advisors. -
The successor has set out his conditions and the compromises he is ready to make. -
The owner-manager and the successor have referred negotiation mandates to their legal advisors. -
The owner-manager and the successor have agreed on a price. -
The successor has negotiated and obtained the necessary financing. -
The due diligence is planned. -
The successor's acquisition terms have been discussed. -
The terms and timing of the transfer of ownership have been discussed. -
The terms and timing of the transfer of ownership are set out in an agreement. -
The agreements with financial partners are signed. -
The legal advisors have drawn up the sales contract. -
The legal advisors have drawn up other contracts, such as the shareholder agreement, if needed. -
The agreements are ratified. -
The successor is the new owner. -
Total score for the company:            
0%
Total score for all the sections at this time 0 / 400 0%
Establish your game plan and retake the survey in six months.

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