Why business owners’ biggest planning gap comes after the sale

Just 9% of Canadian business owners have a formal succession plan, according to research from the Canadian Federation of Independent Business (CFIB), even as a majority move steadily toward exit. The same data shows that 41% expect to sell within five years and another 20% within the following decade.

For advisors, the implication is clear: a significant volume of private business wealth will change hands in the coming years, often without the structured planning required to preserve and transfer that capital efficiently.

Canada is home to more than 1.4 million small businesses, representing a substantial and often underdeveloped client segment for advisors with the expertise to serve them. With increasing demand for specialized investment, tax and insurance advice, business owners present a meaningful long-term planning opportunity.

Despite this, many owners will approach their succession plan alone and often with less confidence than they would if they worked with a financial professional. CFIB’s research shows that business owners are 91% more confident in their succession plan when they have worked with a financial advisor.

For financial planners that have business owner clients who are close to selling their business or have recently sold their business, these clients are prime candidates for discussing planning opportunities

For a successful business owner, succession planning doesn’t stop when the business has been transitioned to the new business owners. Often the proceeds of a business succession are still in a corporate entity for tax purposes, typically a holding company of the owner/manager.

Turning corporate proceeds into intergenerational wealth

This arrangement leads to potential estate planning opportunities that financial planners should be discussing with their business owner clients when helping with preparing the succession plan. By having discussions about the succession plan and what happens after that plan is carried out, planners may be able to save their clients millions of dollars in taxes.

For example, consider a 65-year-old successful business owner who sells their business for $4 million and now they have the proceeds invested in their holding company’s investment account earning 5%. With no estate planning this client has the potential to have a total tax liability, both personal and corporate, of about $2.9 million today.  Leaving their heirs with only 25.5% of the assets once all the tax bills are taken care of.

With proactive planning led by a financial advisor, the outcome can shift significantly. Strategies such as share redemptions, loss carrybacks and the use of insurance to fund future tax liabilities can meaningfully reduce the eventual tax burden.

In this scenario, total taxes at death could fall to roughly $1.9 million, increasing the portion of wealth transferred to heirs to approximately 59% after tax. A detailed breakdown of this scenario is available on the RazorPlan blog, which explores how planning software can illustrate the impact of death and taxation on shareholder wealth.

Planning tools and modelling software can help advisors illustrate these outcomes clearly, enabling more informed decision-making and reinforcing the advisor’s role in long-term wealth stewardship.

Succession planning for a business owner who is looking to transition into their retirement years is important but is not the end of the planning need for this client segment. Incorporating a thorough estate plan within the succession plan will have significant benefits for both the business owner and the planners they are working with.

This article has been produced in partnership with Objectway