The majority of owners are very ill prepared to pass the torch. Only one in ten has a formal succession plan as $2 trillion in companies prepare to change hands.
Retirement is the number one reason cited by business leaders for selling their business.
But many have also suffered from the pandemic and want to escape the stress and let go of their responsibilities.
The COVID Effect
“Customers are becoming more and more unreasonable. Given the pressures of the past two years, the supply chain disruptions, customer and labor issues, I am utterly exhausted,” a retail business owner said in a Canadian Federation of Independent Business (CFIB) report released yesterday.
“The pressure of staying afloat during the pandemic and the stress of dealing with a heavy workload, all with fewer staff because COVID has ‘burned out’ those who mattered makes me think it’s about time to go,” says one restaurant owner.
Unprepared
Three out of four SME bosses plan to pass the torch on within 10 years. The problem is that only one in ten owners in Canada has a formal written succession plan. And of those who will retire within 12 months, only 16% have done so.
A situation that could prove costly and stressful for many, notes Jasmin Guénette, vice president of national affairs at the CFIB.
“Few entrepreneurs contribute to RRSPs or use retirement funds like a government employee. They are financing their retirement by selling the company, explains Mr. Guénette. An entrepreneur invests his entire life in his business, mortgages his house and finds himself in the line of fire. If he sells, he pays for his old age. »
Who takes over?
SME owners have trouble finding a suitable successor. Many also struggle to properly assess the value of their business, notes the CFIB, whose job it is to help.
“There is a $2 trillion market at stake, a challenge but also a great opportunity. We’re passing the torch to a new generation of entrepreneurs. But too many owners are ill-prepared. The challenge is there,” concludes Jasmin Guénette.