Over $2 trillion in business assets are at stake as majority of small business owners plan to exit their business over the next decade
Toronto, January 10, 2023 – Over $2 trillion in business assets could change hands within the next decade as over three-quarters (76%) of small business owners are planning to exit their business, according to a new report by the Canadian Federation of Independent Business (CFIB).
Retirement is the top reason business owners cited for leaving their business (75%), while 22% are burned out and 21% want to step back from their responsibilities as owners. However, only one in 10 business owners (9%) have a formal business succession plan in place.
“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 most common obstacle to succession planning for half (54%) of small business owners is finding a suitable buyer or a successor. Nearly half (43%) of owners are struggling to measure the value of their business, while 39% 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% have accelerated their timeline, often as a result of the stress they were under, while 22% 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 a strong majority (90%) 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%) and selecting the right buyer who will carry forward their way of doing business (84%).
“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.”
Helping business owners connect with potential buyers
To develop a succession plan, 43% of business owners reach out to accountants for their services. Almost a quarter (24%) work with lawyers, while about two in five business owners (39%) rely solely on themselves to develop a succession plan.
To ensure small firms can better plan their succession, CFIB recommends governments:
- Continue to honour the spirit of Bill C-208 should any amendments be introduced, so that intergenerational transfers of small businesses to family members are treated in a similar manner as those to a third party
- Simplify the Lifetime Capital Gains Exemption (LCGE) and expand it to include at least some assets and increase the LCGE amount to $1.2 million for all SMEs (including fishers and farmers)
- Consider creating a business succession immigration stream that allows potential immigrants to purchase and operate an existing business in Canada
CFIB has launched a suite of resources to help business owners plan their exits and find a buyer at Succession Start.
CFIB has also partnered with SuccessionMatching to help connect small business owners looking to sell their business with entrepreneurs looking to buy. With a CFIB membership, business owners get 50% off the formal Succession Planning program and a free one-year membership with SuccessionMatching.com.
"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."
For media enquiries or interviews, please contact:
Dariya Baiguzhiyeva, CFIB
The Canadian Federation of Independent Business (CFIB) is Canada’s largest association of small and medium-sized businesses with 95,000 members across every industry and region. 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 get ready to sell with one-on-one guidance to help them understand and build out all of the necessary components required to sell their business.