TORONTO, January 10, 2023 /CNW/ – Done 2 trillion dollars in business assets could change hands in the next decade as more than three-quarters (76%) of small business owners plan to exit their businesses, according to a new report by the Canadian Federation of Independent Business (CFIB).
Retirement is the top reason given by business owners for leaving their jobs (75%), while 22% are exhausted and 21% want to step back from their responsibilities as owners. However, only one in 10 business owners (9%) has a formal business succession plan.
“For business owners, it is crucial to have a well-planned exit strategy. S over 2 trillion dollars be in play in the next 10 years, and only a small fraction of business owners have a formal succession plan, the risks of improper planning can be high,” he said. Corinne Pohlmann, senior vice president for national affairs at CFIB. “Business succession planning is a key factor in ensuring this Canada still has a healthy small business community.”
The most common obstacle to succession planning for half (54%) of small businesses is finding a suitable buyer or successor. Almost half (43%) of owners struggle to measure the value of their business, while 39% say the business relies too much on them in day-to-day operations.
The COVID-19 pandemic and the challenges it has brought have also affected owners and their departure deadlines. Almost four in 10 owners have changed their exit dates: 17% have accelerated their exit dates, often as a result of stress, while 22% have delayed it by at least a year, often because they have taken on too much debt or the value of their business fell too much during the pandemic.
The most important factor for a strong majority (90%) of owners looking to sell their business is to ensure that their current employees are protected. It is also important to them that the price is as high as possible (84%) and choosing the right customer who will continue their way of doing business (84%).
“The absence of a formalized succession plan could result in job losses, bankruptcies or loss of business stability,” he said. Laure-Anna Bomal, a research analyst at CFIB and one of the authors of the report. “Most business owners rely on the sale of their business to fund their retirement. If they can’t sell their business, they would have to delay their retirement. This adds additional stress to the owner, his family and the employees.”
Helping business owners connect with potential customers
To develop a succession plan, 43% of business owners seek the services of an accountant. Almost a quarter (24%) work with lawyers, while roughly two in five business owners (39%) rely solely on themselves to develop a succession plan.
To help small businesses better plan for their succession, the CFIB recommends that governments:
Continue to respect the spirit of Bill C-208 if any changes are made so that intergenerational transfers of small businesses to family members are treated similarly to those to a third party
Simplify the Lifetime Capital Gains Exemption (LCGE) and extend it to include at least part of the assets and increase the LCGE amount to 1.2 million dollars for all small and medium-sized enterprises (including fishermen and farmers)
Consider creating a business succession immigration stream that allows potential immigrants to purchase and manage an existing business Canada
The CFIB has launched a resource pack to help business owners plan an exit and find a buyer at Start of succession.
CFIB has also partnered with SuccessionMatching to help connect small business owners looking to sell their businesses with entrepreneurs looking to buy. With CFIB membership, business owners receive a 50% discount on a formal succession planning program and a free one-year membership to SuccessionMatching.com.
“It doesn’t matter if you’re planning a transition in the next year, two years, or twenty years, a succession plan is the foundation for that transition. Most deals fall apart during negotiations because business owners aren’t actually ready to transfer their business on paper,” he said. Alison Anderson, founder and CEO of SuccessionMatching.com. “That was the genesis of our formal succession planning program, with the goal of putting business owners in the best possible place for the transition. We look forward to working one-on-one with CFIB members through this partnership to help set them up for a successful exit and merger them with potential customers.”
The Canadian Federation of Independent Business (CFIB) is Canada the largest association of small and medium-sized enterprises with 95,000 members in all industries and regions. CFIB is dedicated to increasing business owners’ chances of success by driving policy change at all levels of government, providing expert advice and tools, and negotiating exclusive savings. Learn more at cfib.ca.
SuccessionMatching is a two-sided marketplace that uses a unique algorithm to match business owners looking to sell with entrepreneurs looking to buy. Their formal succession planning program helps business owners prepare to sell with one-on-one guidance to help them understand and build all the necessary components needed to sell their business.
SOURCE Canadian Federation of Independent Business
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