Canada’s aging owners of small- and medium-sized enterprises (SMEs) are facing a crisis in succession – to the point that the future of Canadian independent business hangs in the balance, according a recent survey by the Canadian Institute of Chartered Accountants (CICA).
Two-thirds of the SME business owners surveyed said that they plan to exit their business within the next ten years and slightly more than one third within the next five years. Yet over 50% do not have a succession plan to manage their exit as they near retirement, the CICA said today.
“The owners of Canada’s independent businesses need to take steps to maintain the value of their hard-earned business investment and ensure the transition of management and ownership goes as smoothly as possible,” said Kevin Dancey, president and CEO of the CICA, in a news release.
To help business owners prepare for this critical transition, CICA today launched a Succession Planning Toolkit for Business Owners. This gives owners the information and tools they need to translate their succession plans into action. It maps out the process of exploring options, so business owners can protect the value of their companies and choose the right exit strategy that makes sense for them, their business and their family.
The toolkit was developed by the CICA in collaboration with experts from PricewaterhouseCoopers, Fasken Martineau DuMoulin and Scotiabank and is the result of a year-long collaborative project. T
The toolkit addresses:
- the “soft issues” (often the most challenging issues for family-owned businesses, and if not well handled, can lead to failure of succession);
- the “technical issues” (an overview of the legal, tax, valuation and estate planning issues reinforcing the need for professional advice throughout the planning stages to help owners achieve their goals and avoid the pitfalls); and
- a process for developing a formal succession plan to protect the family’s assets and ensure a smooth transition.
In addition to practical guidance, the book includes real life stories based on interviews with Canadian business owners to guide readers throughout the process and reinforce the key messages.
Good succession planning is a critical component for the robustness of Canada’s overall economy and job creation potential. Almost 60% of employed Canadians work for a small or medium-sized business, and the SME sector is a valuable contributor of approximately 45% of Canada’s economic output.
“Whether owners want to keep the business in the family or harvest the proceeds and move on, succession is a process that requires thought, planning and time to arrange and implement,” said Dancey. “Getting the right advice is a crucial first step. This is where CAs come in. They can add value to this important stage and help business owners make the best strategic decisions.”