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Are Canadian business owners prepared for succession?

By Generational Equity

Canadian business owners prepared for succession

Earlier this year, an article in Canadian Business highlighted the pending acceleration in company transitions, as baby boomer owners begin to retire at a record pace.

Those owners are now being forced to market by health concerns or a lack of successors within their businesses.

That could set the stage for the biggest intergenerational transfer of companies Canada has ever seen, as gen-Xers and millennials buy out the boomers.

While a boom in business sales is predicted throughout Canada, there are still many that are cautious about beginning the exit planning process. This is unfortunate for a number of reasons, chief of which is that most business owners have not saved enough capital to retire on.

A report published by the Canadian Federation of Independent Businesses in 2014 emphasised that more than three-quarters of small business owners didn’t have plans in place for their retirement. This is in accordance with statistics from earlier in the year that a large percentage of older individuals are not leaving enough funds to maintain the lifestyle post retirement.

Consequently, many small business owners are retaining ownership of their companies until well into their late 60s and 70s, due to the risk inherent in relying on its value to finance retirement. Others are actually selling without considering this risk whatsoever, which can be even more devastating. Fred Dodd’s article in Atlantic Business Magazine reported that the majority of SME (small-to-medium enterprises) owners believe their business is worth twice what it actually is.

Can a business owner adequately prepare for retirement without a clear understanding of their company’s valuation? In a word, no. That is why it is essential to have plans in place for their succession using professional M&A advice. This is where Generational Equity can provide much-needed support.

Our proven process begins with a thorough, comprehensive evaluation of the business. This allows the business owners understand the current business enterprise value of the company and put measures in place to increase its value if necessary. Only through these steps to determine the current market value can an owner make an informed decision regarding when to sell for the most profit.

Above all, don’t allow yourself to fall into the trap of not knowing the true value of your business. Without a full knowledge of its valuation, selling is a definite risk, one that may prove ruinous to your future.

To find out more about planning your exit strategy, you can attend one of our complimentary workshops.