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Family business owners who are thinking about selling their companies and want to tilt the process to their advantage should start planning immediately.

"One reason our family business had a successful succession was because we started the process early," says Laura McNally, part of the third generation at McNally International Inc., a leading Canadian tunneling and marine contractor.

Ms. McNally says her father and uncle decided to bring in an outside adviser and embrace the creation of a family forum to plan for succession. One of the tools introduced was a "three circle" decision-making model that directed three questions: Is this a decision for the family? Is it for the shareholder? Or is it a challenge for management? Each circle involved different stakeholders, which added complexity to the process, but it worked.

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Even though the third-generation family employees were not shareholders, it was decided that it would be sensible to include them in ownership transition discussions because they held important positions in the company. As Ms. McNally's father and uncle started to step back from day-to-day operations, they needed a plan to do it in an orderly way. Ms. McNally played a key role as change agent working closely with other senior managers.

Many owners underestimate the effort needed to prepare a company for ownership succession and the scrutiny of a buyer. They often think a fresh coat of paint is all it takes or that the business will sell itself. "However, this may not get you the best price or the right buyer," Ms. McNally says.

Based on first-hand experience, the McNally story shows that a team effort is required to prepare a business for sale. Here are key actions to think about:

The classic chestnut – strategy

Regardless of timing, a business will be more attractive to a buyer if there is a defined strategy. Not only did McNally's senior management understand the segments of the market that were most attractive, they developed a plan to capitalize on these opportunities and they had a proven track record that demonstrated credibility to buyers.

Figure out what drives profitability

Management realized that as the company grew it needed to focus on its systems and processes and bring them to a higher standard. This required them to extract information from Ms. McNally's father and uncle and to institutionalize their knowledge into procedures and training that would be in place when they were ready to step away.

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Hire your experts early

The shareholders wanted all of their advisers – lawyers, tax planners, family succession and investment bankers – to work as a cohesive team. This required all parties to have an understanding of each other's roles and required effective communication within the team. The advisers were brought in early and they were given ample time to meet management, assess the go-forward leadership team, and become intimately familiar with the business and where it was headed so they could address the key questions that buyers would no doubt have.

"Selling a business and planning for succession is emotional," Ms. McNally says. "It creates not only work stress, but family stress as well. That's when you need to lean on your advisers."

By 2010, the family forum moved into the final stage. All the preparation by management and advisers provided the family and shareholders with the ability to set realistic expectations regarding value and business fit in the event of a sale.

Ms. McNally and her husband Colin Brown now run a consulting practice called McNally Brown Group, which specializes in preparing family businesses for a sale.

Jacoline Loewen is a director at Crosbie, which focuses on succession advice for family businesses and closely held small to medium-sized enterprises. Crosbie develops customized strategies, particularly in relation to M&A, financing and corporate strategy matters. Ms. Loewen is also the author of Money Magnet: How to Attract Investors to Your Business. You can follow her on Twitter @jacolineloewen.

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