Montreal-based Business Development Bank of Canada has introduced a twofold initiative to assist the unprecedented number of Canadian entrepreneurs who are about to pass along their businesses to others.

The transition program will provide the 71% of all existing small-business owners who intend to pass along their businesses in the next 10 years with consulting and financial solutions.

“We want to help them start planning and looking at the options of how they can exit,” says Michel Bergeron, BDC’s vice president of corporate relations. “They need to think about what they want to do in retirement, keeping in mind what that will mean for the future of the business and how they can leave a legacy behind, in terms of the business’s survival.”

The consulting aspect of BDC’s program addresses the strategic issues involved in succession; leaving business evaluation, tax and legal issues to the experts in the networks that the entrepreneurs have built over the years.

BDC will also provide financial support in the form of five- to six-year loans ranging from $10,000 to $10 million. The loans leverage both tangible and intangible assets — land, buildings and equipment, as well as intellectual property, goodwill and client lists.

Bergeron notes that proper planning increases the chances of a successful transition. “It also has a significant impact on the net dollars the owner will put in his or her pocket,” he says. “Planning allows for putting an appropriate tax structure in place, which can sometimes take two years. And the longer entrepreneurs plan, the more options they will have. It will allow them to decide on the role they want to have in the business — as opposed to holding a fire sale because they have to sell right away.

“There are a lot of millionaires out there who don’t know they are millionaires,” he adds.

Recent studies have shown 41% of small-business owners plan to leave their businesses in the next five years, while another 30% plan to leave within 10 years. Yet only 7% have a formal plan for passing along their businesses.

Because it can take three to seven years from the initiation of a business transition to its completion, planning ahead is critical to success.

“One of the reasons we are looking at this carefully is because succession can be a significant event in the life of a small business,” says Bergeron. “It’s not as risky as starting up a new business. But it can be one of the riskiest projects a business will go through.”

A 2005 Canadian Federation of Independent Business study iden-tified business owners’ lack of planning as the biggest obstacle to successful transitions.

“The longer you have for planning, the longer you have to transition the leadership role within the business. The transfer of knowledge is at stake here,” says Bergeron. “The longer you give yourself to facilitate the transfer of knowledge, the greater the chance will be of doing it successfully.” IE