Retiring boomers poised to trigger flood of business transfers: report

Approaching “baby boomer” retirements will result in a huge transfer of business ownership over the next five to 10 years, but only a small percentage of owners have a formal written succession plan, the Canadian Federation of Independent Business says.

In a report released Wednesday, the CFIB suggests 47 per cent of business owners with a small or mid-size enterprise (SME) intend to exit their business within the next five years and 72 per cent plan to exit within a decade.

However, the CFIB report said only eight per cent of owners surveyed had a formal, written succession plan. About 51 per cent didn’t have any plan and 41 per cent had an informal plan.

“While it is encouraging that a good proportion of business owners intend to pass their business on to a new generation, the lack of formal planning gives rise to significant risks for Canada’s competitiveness and prosperity,” the CFIB says in a report by research analyst Marvin Cruz.

“With potentially over $1.5 trillion in assets changing hands during the next 10 years, Canada cannot afford to have so many SME owners unprepared to make that transition.”

The CFIB’s conclusions are based on an online survey of 2,507 small business owners conducted last May and a projection based on a Statistics Canada data on incorporated

SME assets in 2016.

In four out of five cases, retirement was cited as the reason for the planned departure from a business. Other reasons included a move to another business venture or lack of profit in their current enterprise.

About 62 per cent of survey respondents said they’d rely on the sale of their business as a source of retirement income.

The CFIB said formal succession plans have the advantage of being developed with the input of professional advisers who can help develop a timetable and a process for resolving disputes.

It also identifies a number of barriers to creating a succession plan — such as family members who don’t want to take over the business and entrepreneurs who would prefer to start a new business than buying an existing business.