Startups are great, but babyboom businesses need nurture
MOST economies cherish startups and the entrepreneurs who start them. Quebec is also on the lookout for something a bit different. You could call them carry- ons.
The Canadian province, among the most rapidly aging societies in the world, is at the forefront of a dilemma that’s looming for other developed countries too.
Small businesses are the wellspring of employment. A disproportionate share of them are owned by baby boomers now approaching retirement age. What happens to the companies when they get there? Is anyone thinking that far ahead?
The owners, Quebec has concluded, need help in arranging a smooth transition and ensuring the business carries on – for the economy’s sake as well as their own. The scale of the problem is surprising. Almost 60 per cent of Quebec’s small firms are poised to change hands in the next decade, yet only 10 per cent have a formal leadership plan, according to Mouvement Desjardins, Canada’s largest credit union.
“The problem is that owners don’t let go,” said Patrice Vachon, a lawyer with 37 years of transfer experience. Without preparation, “jobs will be lost, that wealth they’d created will disappear, there’ll be nothing to bequeath.
Multiply that by eight million people in Quebec – that’s fewer taxes, less wealth for the people, that’s dramatic.”
It’s a challenge that’s on the radar in ageing societies from Japan to Europe, but one that often gets over- shadowed by other demographic concerns, such as shrinking labour pools or underfunded pension plans. Quebec has become something of a pioneer in addressing it.
Policy makers, universities and leading executives are pushing business- owners into readying a sale plan in advance – and ensuring qualified people are ready to take charge.
Like Allysha Carr, who is supplementing her MBA with a new part-time programme at Concordia University that teaches people how to take over a business.
Operating her parents’ Montreal flower business wasn’t what she initially expected to do.
“The independence and the flexibility, and a career that I was really proud of, was kind of right in front of me,” said the 28-year- old Carr, whose decision may save as many as 10 jobs when her parents retire.
Of course, an in-family succession isn’t always an option. Kids might not want to inherit or return to rural areas after studying in large cities, said Peter Jaskiewicz, a professor at the University of Ottawa. Falling birth rates will only make it worse, he said.
The demographics are alarming. With a quarter of its population projected to reach age 65 by 2030, Quebec is ageing more rapidly than the US, the UK and the rest of Canada. A third of business owners have already turned 55, up from just 18 per cent two decades ago.
The province, whose economy is emerging from a decades-long slide, is doing its best to dodge the succession bullet.
The Liberal government broadened tax breaks last month for family transfers, and is funding the Quebec Company Transfer Center, an agency that helps match buyers with sellers.
Carlos Leitao, the provincial finance minister, says the demographic trend, if unchecked, could lead to a sustained decline in Quebec’s productive capacity and a repeat of the 2009 recession, which saw a “brutal drop” in exports and many bankrupt companies.
“The issue of company transfer is always important,” Leitao said in an interview.
“But now, in 2017, 2018, 2019, it’s becoming one of strategic importance.” — WP-Bloomberg