At a time when the retirement exodus among entrepreneurs, particularly those aged 50-64, is accelerating, six in 10 entrepreneurs are unprepared for the transition.
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Réseau M, which publishes the new Quebec Entrepreneurial Index, sees this disorganization as a threat to corporate survival.
“We’ve invested so much in creating companies, we need to make sure they’re passed on to the next generation,” says Rina Marchand, Senior Director, Content and Innovation at Réseau M.
She is saddened and surprised that underpreparation is as rampant today as it was in 2010, while an entire support ecosystem has since been put in place to support and encourage acquisitions.
“It really is an emergency because there is currently an exit of our entrepreneurs between the ages of 50 and 64, whose exit is being accelerated by the pandemic and we are not preparing any better than before,” she notes, adding that the complexity of transferring businesses is largely underestimated by transferors, as are the human risks involved.
Among the 50-64 year olds, 70% of entrepreneurs intend to quit their job within 10 years. There is no guarantee of success as 18% of owners have already failed when attempting to sell or hand over their business. 22 percent broke their teeth during a takeover process.
Our family business
Within family businesses, identification of the next generation is more advanced, with more than half of owners having already taken this step.
“Family businesses are better prepared because succession is part of their DNA. They think about what’s going to happen next, who’s going to take over,” explains Jorge Mejia, professor and director of the Montreal Institute of Entrepreneurship Observatory at the National Bank-HEC.
However, succession arrangements and the support of external experts are still the decision of a minority of companies, even within families. Accounting and tax support remains the most popular, while all human aspects of the transfer seem to remain in the vendors’ blind spot.
“When we consult experts, we see a little further here, a little further. If you don’t prepare, it can mean selling at a discount,” warns Rina Marchand.
One factor that has some reassurances for entrepreneurship scholars is the willingness of three quarters of prospects to start a business by acquiring a business and wanting to do so as a group.
“That’s very high and I think that’s good news because if we have the chance to work together as a team, we have the opportunity to enrich ourselves with different cultures and disciplines,” predicts M Mejia.
However, in view of the high number of companies to be taken over, more people have to be persuaded to set up a company if the ratio of one company per buyer is no longer given. However, start-ups attract more people than takeovers. In addition, the number of immigrants interested in business is shrinking, while the labor market offers them significantly more opportunities than in previous years.
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