Business Beat: Succession planning

By Michael Harrington on July 7, 2021.

More than $1.5 trillion in business assets is expected to change hands in the next decade. While this number might sound unbelievable, 97.9% of businesses in Canada are small businesses, and many of those are owned by Baby Boomers. Boomers were the largest demographic in history, until they were surpassed by Millennials – and Boomers are retiring.

In every city, these small businesses provide the flavour of the city. They create the buzz, shape the identity and are the single biggest driver not only of employment, but of lifestyle and the experience economy. After all, 97.9% is, well, a lot.

There exists a disconcerting reality, however. As a former small-business owner myself, I know that many, perhaps most, small business owners do not have a succession plan. This is to be expected. Small businesses are often passion-plays. They are cool ideas shooting gaps in the community, in which the expertise lies in the product or the service – not in accounting or legal services. This is what makes small businesses so cool in the first place. However, it is also why many small business owners simply wind down the business and retire. And this hurts communities.

For a moment, take inventory of the businesses you frequent, from the tire shop to the cafes. It is actually much easier to count the businesses that I frequent that are not small businesses. Imagine if every one of those businesses simply closed. Employment, GDP and some component of community identity would exit with them. Paradoxically, imagine now if each of those businesses were sold to a local resident, providing continuity of employment, revenue and community offering. And then of course, there is the cash outgoing owners receive. It’s a win-win-win: seller, buyer, community.

At Community Futures Entre-Corp, we believe succession planning is one of the most important things on the economic development radar. But, returning to the passion play concept, many small business owners feel “exit strategy” is a four-letter word. They see it as the business version of a prenup. It’s best not to speak about it. Your accountant would disagree, and so do we.

That change in perception starts with identifying those misconceptions and dealing with them. Once we progress past the emotional and psychological taboo of discussing succession planning, we can then turn our focus to creating a plan. You will sleep better at night. I guarantee it. This process has a long runway, so it is never too early to start contemplating it.

And so, we invite you to visit our Youtube channel and watch the six-part series on succession planning. This is not meant to be a comprehensive course on selling your business. It is meant to plant a seed, get your gears turning and encourage you to have a conversation with your accountant, lawyer, and for family businesses, family members, long before you wind down. In the first two webinars we address the psychological hurdles and typical conflict that may occur when selling a family business with the Alberta Business Family Institute. We then invite Drew Jackiw from JMH to guide us through a crash-course on financial statements, look at business valuation, the succession process and financing a business transfer. The final episode discusses taxation and legal considerations, for which Hilary Pritchard from Pritchard & Co. Law joined us.

To view these webinars go to Youtube and search “Community Futures Entre-Corp.”

Michael Harrington is Community Economic Development Officer at Community Futures Entre-Corp