Small Business Succession: Many Business Transfers Coming Shortly
The Canadian Federation of Independent Businesses (CFIB) released a report on January 10, 2023, focused on succession expectations for small businesses. It included the following survey responses:
- 76% of small business owners (constituting $2 trillion in business value) are planning to exit their business in the next 10 years;
- 9% have a formal business succession plan in place;
- obstacles to succession planning include:
- finding a suitable buyer (54%),
- business valuation (43%), and
- over-reliance of owner in day-to-day activities (39%);
- considerations that owners selling their businesses found to be very or somewhat important were:
- ensuring current employees are protected (90%),
- getting the highest price (84%), and
- finding a buyer who will carry forward their way of doing business (84%)
- business owners reach out to the following individuals to develop a succession plan:
- accountants (43%),
- lawyers (24%), and
- only themselves (39%);
- business owners plan to sell to the following persons:
- unrelated buyers (49%),
- family members (24%), and
- employees (23%).
There are many hurdles and opportunities in selling a business. Many can be addressed in advance, leading to significant improvements in the sale process and an increase in sale price. Often, several years are needed to position the business for sale or transition sufficiently, so planning should start as early as possible, even if the owner has not definitively determined if and when the sale will occur. In many cases, simply preparing for a sale can lead to increased profitability, efficient processes and reduced stress for the owner, such that they are in a better position even if they eventually decide not to sell.
ACTION: If you are considering selling or transitioning your business in the near to medium term, start planning now to ensure a smooth transition.