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The Human and Psychological Dimension of Business Transfer: A New Approach for Accountants

This text is part of the special Accounting Profession section

Business transfer is a story of passion, love, power, conflict, generations, mourning,” explains Éric Dufour, CPA and regional vice-president, national leader in business transfer at Raymond Chabot Grant Thornton (RCGT). “For too long, accountants have treated these questions in a cold, purely accounting manner. But in 2023, the human and psychological dimension is central to our work. »

The economic challenge of business transfer is enormous, he explains, because the baby boom generation of entrepreneurs is aging and 80% of SMEs are family-owned. SMEs are an important engine of growth, and ensuring their sustainability is therefore vital for Quebec’s economic future.

For the entrepreneur who wants to hang up his skates, should he sell or transfer? The outright sale has the advantage of being quick, but the buyer will do as he sees fit. And it happens that a distant headquarters then empties the work of a lifetime of its main functions.

“A business transfer is less easy than a sale. For the entrepreneur, it is a journey, sometimes long, which will not give him more, but which he considers important for his heritage, his entourage, his community”, explains Pascal Moffet, partner, corporate finance consulting services at CASE.

Both at this accounting firm and at RCGT, the teams responsible for business transfers have long since modified their approach to place people at the center of their activity. The work now relies on human resources and the psychology of the transferor and the relievers. Finance and taxation come later.

It all starts from the diagnosis

The transfer plan begins with a photo, explains Éric Dufour. We examine the situation of the company in its market, the validity of its business plan, but we focus at length on the personality of the transferor. “We want to know their vision, their dreams, their personal financial planning. »

We then ask the same questions to those who are identified as relievers and to the company’s main executives. “We are forcing discussions that have often never taken place,” says Pascal Moffet. Sometimes red lights come on, visions diverge, anticipated relievers don’t have the interest, ability or taste [de se lancer dans cette aventure]. »

Once the replacement has been found, we move on to the “transfer plan” itself. It is necessary to order the role of the next generation, and at what pace decisions and prerogatives will be transmitted.

“Nowadays, 70% of transfers are hybrid, that is to say they involve both family and executives. The sole entrepreneur is over, says Éric Dufour. Then we establish a joint table which brings together the transferor and the successors, and which can sometimes involve the family council. »

In the mind of Pascal Moffet, one of the essential elements consists of educating. The transferor must agree to share the risks, benefits, responsibilities and decisions. But relievers also need to understand what they’re getting into. “Being a boss doesn’t just mean playing golf,” he laughs. It also means sleepless nights trying to resolve problems. »

It is only once the psychological and human dimensions are well defined that accounting firms bring in the classic mechanics: value, taxation, sales agreement, shareholders agreement, etc.

“It takes three to five years to carry out a successful transfer plan,” explains Éric Dufour. It can’t be organized at the last minute. »

Both Pascal Moffet and Éric Dufour judge that the question of finance is secondary in the process. Sources of traditional capital are abundant for businesses with tangible assets (buildings, factories, trucks, machinery). And there is no shortage of funding from other sources either. Capital Desjardins, Fondaction, Fonds de solidarité FTQ and the many venture capital companies know how to invest on the basis of “esoteric” notions such as the competence of the team, the succession plan, the transfer plan, the business plan.

Screams and punishments

In executing the plan, accountants must constantly deal with the psychological dimension. “There are relievers who call me crying because the transferor does not keep his promises. Sometimes, it’s the transferor who calls me saying: “I’m not capable. What am I going to do ?” »

This is where external capital becomes really useful: it allows the transferor to disburse their assets and secure them psychologically. “It’s one of our things,” admits Éric Dufour. The transferor is then more inclined to participate, to accept the decisions of others. »

The process is very scalable, explains Pascal Moffet. “It is very rare that the final transfer is identical to the initial plan. Very often, the 10 initial shareholders are left with only three or four at the end of the race. »

Both accountants agree that sometimes, despite all efforts, the transfer does not take place and the entrepreneur is forced to sell. Either because the relievers don’t have the resources they thought they had, or because the father and son are at loggerheads…

But you have to be philosophical, explains Pascal Moffet. “The main thing is that they realized this before concluding the transfer, because undoing a transaction is always very difficult. Fortunately, in almost 100% of cases, the transfer goes correctly because everything had been well thought out and correctly structured. »

This content was produced by the Special Publications team at Duty, relating to marketing. The writing of the Duty did not take part.

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2023-09-23 07:06:29
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