Succession planning has many angles.

When entrepreneurs and businesspeople think about succession planning, it's usually in relation to ensuring they have a structured system for replacing key personnel within the organization. But, like the shoemaker's children who have the poorest footwear, business owners often forget to establish a succession plan for themselves.

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Perhaps the easiest way to explain this is in the form of a question: where will all the equity go?

For most business owners the equity in their businesses forms a large part of their personal net worth. But equity can be a slippery thing. You can't touch it, yet you can sell it. So long as there is a proper plan in place to crystallize that enterprise value.

In today's business environment, with the economy chugging on all cylinders, a significant amount of equity is being created. Converting that equity into cash at some point must move up the average businessperson's 'To Do' list for a couple reasons. First, it's important. Second, today's demographics are casting a shadow over our ability to successfully execute the crystallization exercise.

To put it bluntly, most business owners are in their 50s and 60s. As a subset of our population, they mirror the broader demographics dominated by the Baby Boom generation which is running headlong into retirement age. All of this begs the question ... if all those Boomer-aged business owners take their equity to market on the same day, who will be there to buy it?

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The worst-case scenario in this story is that many entrepreneurs, especially those who don't have a structured plan in place to execute an effective exit, will face the prospect of having to walk away from their businesses at retirement because they couldn't find a buyer. In other words, their equity would evaporate and along with it their life's investment in an enterprise. Sure, the business would have paid its way in the form of a salary or bonuses during the years that it operated, but the future value of that enterprise's cash flow would be lost. That's not good for the owner. And it's not good for our economy.

Our demographic reality is fairly straightforward. There are more boomers than members of the echo generation who we'd naturally expect to become the business owners of tomorrow.

From the younger generation's perspective, the pickings will be awfully good. They'll have their choice of businesses to buy and these enterprises will be available at a song as the older generation puts businesses on sale in hopes of getting any value at all for the equity. For my kids, this will be a golden time. For those in my generation, it will be a tale of gold lost.

All of this points to the need for some action. First, today's business owners need to get serious about developing succession plans for themselves. Whether that's transitioning the business to a family member, finding an external buyer, to formulating a strategy that makes it possible for the firm's employees to become owners, too much planning just isn't possible. On the latter concept, of selling to employees, there are some effective but little-known vehicles available that are worthy of some exploration.

One of my favourites is the Type B labour-sponsored venture capital corporation or LSVCC. The traditional LSVCC, a pool of money managed by a professional investment team, is known as Type A and is designed to invest in a basket of enterprises. The Type B version is designed to invest in only one enterprise and is available only to employees of that business.

The really attractive element of this unique-to-Saskatchewan legislation is the fact that the employees can qualify for tax savings. In other words, they can use the tax system to buy equity in their employer's enterprise.

If there's a shortcoming, it's that the legislation limits the tax benefit to an investment of $5,000 annually but it's a start. And, the province is flexible on this front, offering to allow employees to pledge $20,000 or $25,000 towards stock purchases and receive the tax benefit over several years. Further, these investments are RRSP eligible so they can qualify for even further tax savings.

A relatively small number of Saskatchewan businesses have accessed this legislation, which is a shame since it can be a powerful tool for introducing employees to the notion of equity ownership and can be the basis for a succession plan while offering a solid exit for an existing business operator. For more information on this legislation, visit the Saskatchewan Industry and Resources Web site under the 'Investment' tab.

Paul Martin is heard daily on 980 CJME and 650 CKOM as well as on the radio stations of the Golden West Broadcasting network in Saskatchewan.