More than $2 trillion in small business transition at stake: CFIB report

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Over $2 trillion in business assets could change hands within the next decade as over three-quarters (76 per cent) of small business owners are planning to exit their business, according to a new report by the Canadian Federation of Independent Business.

The national organization said Tuesday that retirement is the top reason business owners cited for leaving their business (75 per cent), while 22 per cent are burned out and 21 per cent want to step back from their responsibilities as owners. However, only one in 10 business owners (nine per cent) have a formal business succession plan in place.

Corinne Pohlmann

“It’s essential for business owners to have a well-planned exit strategy. With over $2 trillion set to be in play in the next 10 years and only a fraction of business owners having a formal succession plan, the risks of improper planning can be big,” said Corinne Pohlmann, Senior Vice-President of National Affairs at CFIB. “Planning for business succession is a key factor in in ensuring that Canada continues to have a healthy small business community.”

The CFIB report found:

• The most common obstacle to succession planning for 54 per centof small business owners is finding a suitable buyer or a successor. 43 per cent are struggling to measure the value of their business, while 39 per cent say the business is too reliant on them for day-to-day operations;
• The COVID-19 pandemic and the challenges it brought have also affected owners and their exit timelines. Nearly four in 10 owners have changed their business exit dates: 17 per cent have accelerated their timeline, often as a result of the stress they were under, while 22 per cent have delayed it by at least one year, often because they had incurred too much debt or the value of their business had gone down too much during the pandemic;
• The most important factor for 90 per cent of owners looking to sell their business is ensuring their current employees are protected. It’s also important for them to get the highest possible price (84 per cent) and selecting the right buyer who will carry forward their way of doing business (84 per cent).

Laure-Anna Bomal

“Not having a formalized succession plan could result in lost jobs, bankruptcies or loss of stability for the business,” said Laure-Anna Bomal, Research Analyst at CFIB and one of the authors of the report. “A majority of business owners rely on the sale of their business to fund their retirement. If they can’t sell their business, they’d have to delay their retirement. That adds another stress to the owner, their family and employees.”

CFIB has launched a suite of resources to help business owners plan their exits and find a buyer at Succession Start.

CFIB said it has also partnered with SuccessionMatching to help connect small business owners looking to sell their business with entrepreneurs looking to buy.

The CFIB is Canada’s largest association of small and medium-sized businesses with 95,000 members across every industry and region.

Alison Anderson

“It doesn’t matter whether you are planning to transition in the next year, two years or twenty years, a succession plan is the foundation for that transition. Most deals break down during the negotiation because business owners are not actually ready on paper to transition their business,” said Alison Anderson, Founder and CEO of SuccessionMatching.com. “That was the genesis of our Formal Succession Planning program, with the objective of putting business owners in the best possible place for 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 match them with potential buyers.”

(Mario Toneguzzi is Managing Editor of Canada’s Podcast. He has more than 40 years of experience as a daily newspaper writer, columnist, and editor. He worked for 35 years at the Calgary Herald, covering sports, crime, politics, health, faith, city and breaking news, and business. He works as well as a freelance writer for several national publications and as a consultant in communications and media relations/training. Mario was named in 2021 as one of the Top 10 Business Journalists in the World by PR News – the only Canadian to make the list)