Business owners ‘live every day for their business.’ Advisors can help them plan a successful exit

By Noushin Ziafati | July 21, 2025 | Last updated on July 21, 2025
5 min read
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iStock.com / Sezeryadigar

Sébastien Desmarais recalls a time when his client received “the offer of a lifetime” for their business, setting the wheels in motion for an exit.  

But because the client had never thought of creating a succession plan, they didn’t have their corporate, legal and tax records in order.   

With just a few months  to produce these documents for the deal to go through, the business owner ended up scrambling, said Desmarais, vice-president, tax and estate planner and business succession advisor with TD Wealth in Ottawa. 

“The purchaser knew full well at some point that the client was struggling to get things in order. So, they were playing hardball. They were about to renegotiate the prices down,” he said. “The emotional toll on that client was significant.” 

While Desmarais and his client were able to produce the required documents in time and the deal was completed at the initial offer price, the experience underlined a valuable lesson. 

“Business owners live every day for their business, so …  they don’t anticipate these successions, whether it’s an offer or letting go,” Desmarais said. “I think this is where advisors can really come together and help them, at least planting the seed to make sure everything is in order, or start putting things in order for that business owner.” 

Here’s how financial advisors can help their business owner clients plan a successful exit. 

Get clients thinking about their exit  

Advisors can get clients’ succession planning gears turning by asking key questions. 

For example, ask them what price they’d be willing to sell their business for.  

“That triggers a little bit of a subconscious idea that, ‘Wait a second, that can happen tomorrow, an unexpected offer,’” Desmarais said. 

They can also ask whether the client wants anyone in their family to take the reins of the business, and if so, what timeline they’re considering for such a transition.  

That will help them realize that if they want the business and the next generation to succeed, “they need to take the time to plan for it,” Desmarais said. 

Further, advisors should listen carefully to what their clients want in a succession — it can be an emotional life change.  

“Sometimes advisors like to take the lead and plan for what would be in the best interest of the client, and they may not align with the business owner, which brings frustration,” Desmarais said. 

This is especially crucial because for many entrepreneurs, their business is “kind of their baby,” said Kevin Zhao, senior engagement manager with Sapling Financial Consultants Inc. in Toronto.  

“They built it out for 20, 30, 40 years [in some cases], and they’re really trying to pass it off in a nice way, so that it can survive the future and not just kind of disappear into the unknown,” he said.  

Start the planning early 

While no two businesses are the same, the general rule of thumb is to plan a succession two to five years out from an anticipated exit or ownership transfer. 

This allows enough time for thorough preparation, including tax planning, identifying and developing successors and adequate consultation with experts. 

“I’d say if you give yourself five years, it gives plenty of time to the business owner to grasp the concept of business succession, of letting go, and make sure that the advisor crosses all the t’s and dots all the i’s properly,” Desmarais said.   

The harm of not planning far enough in advance is that something unexpected could happen, leaving a business owner’s family members, staff or even community members to pick up the pieces.  

“You’ve heard the stories saying, ‘He left a mess, passed away, no business succession plan,’” Desmarais said. “That could’ve been avoided or minimized, just with proper planning.” 

Zhao’s advice is to “start with the hard stuff.”  

If a business has “really bad” accounting or software systems that manage key parts of the business operations, he recommended homing in on those systems early on.  

“Trying to change the system itself could take half a year to a whole year, so starting there will be good,” he said. 

Connecting clients with the appropriate experts, including accountants, lawyers and business valuation professionals, early in the planning process also helps ensure a smooth transition. 

Closer to the selling day, business owners should undertake different initiatives “to show the growth trajectory of the business” to potential buyers, such as increasing their revenues and hiring more people, Zhao said.  

“If a big portion of the company’s revenues are one time in nature, non-recurring, or hard to predict, then buyers are more likely to discount that amount in the future,” he added. “But if you can show consistently, year over year, the same customers, same amount or increasing sales, then obviously that’s good and … increases the valuation.” 

Accounting for the accounting 

Before an offer comes in or a business owner client prepares to transfer ownership of their business, advisors should ensure their client consults an accountant or accounting team and that their financial statements are accurate and up to date.  

“If a third party comes in and says, ‘We’re looking at purchasing,’ and you say, ‘Here are my books, everything is in order — the tax implications are in order, financial statements, balance sheet, income statement,’ it brings confidence on the [part of the] purchaser,” Desmarais said.  

One thing to consider is whether the business owner needs to convert from cash to accrual accounting, which is seen as a more comprehensive and accurate picture of a company’s financial health. Accrual accounting features revenues and expenses that are recorded when they’re earned or incurred, not necessarily when cash is received, Zhao explained. 

“The converting process can be long, so that’s why if you start early, it can iron out other kinks,” he said. 

Where applicable, business owners must also reconcile their accounts and separate their personal and professional expenses in financial statements, Zhao recommended.  

Tax considerations 

Another key part of the succession planning process is accounting for tax implications. 

Advisors and other experts should pinpoint ways that their business owner clients can take advantage of tax incentives in Canada to either avoid, minimize or defer taxes.  

This includes the lifetime capital gain exemption (LCGE), which allows eligible small business owners to sell qualifying shares of their business and shelter up to $1.25 million in capital gains from taxation. 

In a family succession, it’s also possible for multiple family owners to use their individual LCGE, Desmarais said. 

Another potential future tax incentive is the Canadian Entrepreneurs’ Incentive (CEI), which has yet to receive royal assent. If the CEI gets implemented and is combined with the LCGE, eligible entrepreneurs could benefit from at least $3.25 million in total and partial lifetime capital gains exemptions when selling all or part of a business. 

“With proper tax planning, business owners will be able to potentially minimize their taxes, providing great value for all the hard work and time that they spent over the years in the business,” Desmarais said.  

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Noushin Ziafati

Noushin has been the associate editor of Advisor.ca since 2024. Previously, she worked at outlets including the CBC, Canadian Press, CTV News, Telegraph-Journal and Chronicle Herald. Reach her at noushin@newcom.ca.