Transferring a business is much more than a financial transaction. It’s a crucial step in the life of a company, as well as that of the owner and their successor.

If you’re a business owner, you may recognize yourself in these numbers, which point to a growing interest in business transfers. According to the 2022 Quebec Entrepreneurial Index by Réseau Mentorat,[1] sixty percent of business owners are thinking of transferring their business in the next 10 years. However, only 40% have identified a potential successor, while 60% underestimate the actual time required to complete the transfer. “While it’s a stimulating project that calls for taking on new challenges, it’s important to prepare this transition meticulously, taking every step necessary to ensure maximum success,” says Éric Waterman, Vice-President, Agri-food at Inno-centre.

This means that more than half of Quebec business owners are thinking of stepping aside within the next ten years, a figure that rises to almost 70% among those aged 50 to 64, whose primary motivations are retirement or the desire to withdraw from the business world. Quebec is undoubtedly a breeding ground for SMEs. There seems to be no doubt that opportunities for transfer will be numerous and profitable for maintaining the province’s economic fabric.

Transferring a business takes time and planning

According to the experts, the success of this process depends, among other things, on planning ahead and giving yourself all the time you need to get the job done. Rushing things is never a winning approach. For entrepreneurs who are used to action, they will undoubtedly need to curb their enthusiasm. As the saying goes: Good things come to those who wait.

“Taking your time often runs counter to the fundamental qualities of the entrepreneur, who is accustomed to turning on a dime,” says Gilles Boileau, Senior Business Advisor at Inno-centre. “That being said, taking your time doesn’t mean wasting your time. It’s more a question of doing things methodically,” the expert adds.

Beginning a transfer process is a wonderful opportunity to rethink your business, the values that define it and the future direction you want it to take, while making sure you have the right tools and the right people to realize your ambitions. To achieve this, the experts we consulted on the topic mentioned a number of concepts: Strategic plan, communication, values and support.

A well-thought-out approach

There are many different types of business transfer. Of course, there are family succession and selling to a third party, but there are also transfers to groups of employees, whether or not they are in management, as well as mixed approaches that combine various combinations of these scenarios. Company takeovers by groups of people have also gained in popularity. According to the Quebec Entrepreneurial Index, nearly two-thirds of business owners who have taken over a business did so with other people.

Mr. Salvas was fortunate, as he puts it, to have “the big ask” from his daughter Camille. The co-founder of Fromagerie Polyethnique Le Bédouin, located in St-Robert, started his business in 1995 as a way to find markets for the milk produced by local dairy farmers. Today, he’s preparing to pass the torch. “We started from nothing, and we put so much effort into the business that we obviously want it to continue to thrive even after we’re gone. If we do nothing to transfer it, it will be a brake on its success. This is part of an entrepreneur’s natural decisions, just like planning for the growth of their business.”

Having experienced a previous transfer of his family’s farm, Mr. Salvas had the experience required to avoid the often overlooked pitfalls, such as neglecting to surround oneself and not seeking a neutral opinion. “You have to be open in the context of a transfer process, but also show humility by seeking help if you want to maximize your chance of success,” he adds.

Gabriel Laurin, for his part, experienced a business transfer from the other end of the spectrum. With his childhood friend Olivier Goulet, they acquired Artypac Automation, a manufacturer of automated packaging equipment, in February 2023, after several months of negotiations. Together, these two young men had previously built up a solid background in business and finance. Despite this, they realized that a project like theirs required support. They turned to Inno-centre for assistance with legal and operational issues, organization and task definition, documentation of know-how and communications with employees.

“The challenge has grown recently due to economic instability,” Laurin says. “Let’s just say the learning curve has been very steep over the past year. There are only 24 hours in a day, and we don’t have enough time to be able to do everything and consider all the variables we face. Hence the importance of surrounding ourselves with a good team, including external experts,” Gabriel explains.

A step that usually requires three to five years

Renée Émond, Senior Business Advisor at Inno-centre, echoes Mr. Salvas’ comments on business transfers. “It’s an inevitable step for all SMEs, regardless of their size.” The advisor speaks from experience, having started her own business while still a student before selling it several years later, in 2015. “What’s important to remember,” she says, “is that a transfer is something to plan for, like all major business decisions.” Especially since, in many cases, the company is the pension fund for its managers, who will need it to ensure their comfort or undertake new projects.

At this step, the entrepreneur generally has two main financial objectives, Mr. Boileau adds. “First, to sell their business in a financially healthy state to maximize its value and attract numerous buyers, and second, to identify potential buyers who can finance themselves to pay for it without any problem.”

A company’s value is not only determined by its past performance; it’s also based on future profitability. “Financial partners and potential buyers will be reassured by long-term financial objectives that are formally supported and monitored, and by an up-to-date financial balance sheet,” says Boileau.

As the expert said previously, taking your time doesn’t mean wasting your time. “To do it right, the recommended tool is to establish the company’s strategic plan, involving all members of management. This plan is usually established for a period of three to five years, and reviewed regularly to adapt to events. It’s an almost daily tool,” Mr. Boileau explains.

In addition, for investors and financial institutions, detailed planning for the transfer, along with support from an experienced team, will have an incentive effect and help put the risk into perspective.

Communicate, communicate, communicate!

The other aspect not to underestimate is communication. Here, it’s a question of sharing a common vision. “It’s about establishing what the common denominator is for everyone involved in the process, and making sure we’re all going to the same place,” says Renée Émond.

As pointed out by Sarah O. Gauthier, also a senior business advisor at Inno-centre, a transfer relies on human intervention, which means defining the roles of everyone involved, present and future. Nor is it a linear process. Each approach is unique to each company.

At the outset, we recommend taking stock of the situation, a step that takes more time, but if it’s done properly, it helps you understand the values at stake and move forward smoothly. Establishing structures is also recommended, in order to ensure that information flows smoothly throughout the process. This involves setting up a governance and advisory committee, as well as a board of directors. Despite common perceptions, these structures can be put in place without being cumbersome. “They enable us to talk to one another at the right time and in the right place. It’s one of the key elements of a successful transfer,” says Ms. Gauthier. It’s also a space we give ourselves to dare ask the questions that are sometimes difficult, while respecting each other’s pace and maintaining the momentum to achieve the objective. After the strategic plan comes the action plan, which includes a series of steps ranging from the transaction to the transfer of knowledge. This is another crucial stage, requiring support and commitment from all parties.

When the end becomes a new beginning

Transferring your business is a major step, and often a legacy you want to pass on to future generations, or to the sector to which you’ve devoted many years of your life. In addition, the original owners can continue contributing to the company’s development and sharing of knowledge. Even more encouraging is the fact that just over 40% of original owners wish to remain involved in the company after the transfer is complete.

Gabriel Laurin can testify to this invaluable collaboration with the transferring owner, as he is counting on the presence of one of Artypac’s founders for some time to come, four days a week, to follow up with customers and fully understand their needs. The fact that this person is still with the company provides stability for the staff, along with a transfer of his 20 years of knowledge in various applications. This collaboration also enables the new owners to focus on the company’s future projects, including efforts to boost visibility in new markets, which seem to be paying off. Last December, they signed on a new partner from Texas. For Gabriel and Olivier, these prospects would perhaps be quite different without the support of this founder and the external expertise that enabled them to identify and agree on the strategic, legal and tax considerations to ensure long-term growth.

Jean-Pierre Salvas continues to work at the cheese dairy every other week, mainly to monitor sales. His eventual departure does not mean the end of the projects, far from it. The company’s ambition is to implement more ESG practices, and they are also exploring distribution channels for the American market.

To sum up, transferring a business requires a planned process to which you should devote all the time needed. You also need to surround yourself with a team, both internal and external, equipped with multiple areas of expertise, in order to bring the project to completion and ensure the long-term future of your business.

[1]The 2022 Quebec Entrepreneurial Index by Réseau Mentorat is presented by Quebec’s Ministry of the Economy, Innovation and Energy along with the following major partners: National Bank, Caisse de dépôt et placement du Québec, Familles en affaires - HEC Montréal, National Bank - HEC Montréal Institute for Entrepreneurship and the Ordre des CPA du Québec. The 2022 Index is produced in partnership with the Centre de transfert d’entreprise du Québec, Evol and Léger.

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