TORONTO, ONTARIO--(Marketwire - July 19, 2012) - More than one-third of Canadian small business owners currently have a succession plan in place, according to a study released today by BMO Financial Group. This represents a significant increase from the 15 per cent who reported having a plan in 2010.
However, despite an increasing awareness of the importance of having a succession plan, the majority of Canada's small businesses (58 per cent) still do not have one in place. The study found the top reason preventing Canadian small business owners from establishing a succession plan was the view that it was too early to begin thinking about it (36 per cent).
"Just like creating a business plan or buying insurance, implementing a succession plan well in advance of your projected retirement can guarantee a smooth transition process once it's time to execute it," said James Wong, Vice President of Succession Planning, BMO Financial Group, and co-author of The Transition Experience: What Every Canadian Family Business Owner Should Know Beyond Succession Planning. "Creating a succession plan can also help realize the maximum potential value of a business while mitigating risks associated with economic uncertainty or a sudden shift in management."
BMO's 2012 study, conducted by Leger Marketing, also revealed that:
- Of those business with 10 employees or more, half had a succession plan in place; two-thirds of business with fewer than 10 employees reported they did not have a plan
- One-third (36 per cent) of Canadian small business owners want to keep their businesses in the family
- More than one-quarter (26 per cent) would select an outside source to buy out their business
"It is never too early to start thinking about implementing a succession plan," said Cathy Pin, Vice President, Commercial Banking, BMO Bank of Montreal. "When you consider that many Canadian business owners are set to retire in the next decade, planning for succession should be a priority for every business. You've worked hard to make your business a success, so it makes sense to have your legacy continue in the way you envision it."
BMO offers small business owners the following advice to get them started down the path of succession planning success:
Get a head start: Many business owners assume the demand for their business will be there once they are ready to make the move, but this is often not the case. Succession planning should begin at least 10 years in advance to realize the full potential value of the business and ensure a smooth transition.
Consider every option: Whether a small business owner chooses to sell, transition to a family member or business partner, or dissolve the business completely, many complex issues need to be evaluated before a final decision is made.
Speak with a financial advisor: Just as each business is unique, so is every succession plan. By working with a financial advisor, small business owners can develop tailored solutions and an ideal succession strategy to meet their needs. Questions to discuss with a financial advisor include: Who should succeed you in your role? When would be the ideal time to begin the transition? How should the transition be structured?
The 2012 survey was conducted by Leger Marketing and was completed between March 21, 2012 and April 12, 2012, with a sample of 500 Canadian business owners. A probability sample of the same size, would yield a margin of error of ±4.38%, 19 times out of 20.
The 2010 survey was conducted by Harris/Decima among 650 Canadian business owners (400 small, 250 larger) and 650 US business owners (400 small, 250 larger). Data were collected between September 22, 2012 and October 10, 2010. Results were weighted using business size within region.