News Releases
Canadian business owners are undecided about a planned exit strategy with the vast majority unsure how, when or to whom they will relinquish their business.
According to a recent Harris/Decima study commissioned by BMO Bank of Montreal, over half (56%) of businesses polled are in the later stages of their enterprise and yet only 21 per cent of these business owners have named a successor. Of those businesses who do not have a succession plan in place, 40 per cent believe it is too early to do so. Yet, in stark contrast to this claim, more recent business owners see the value in putting a formal succession plan into place earlier in the business lifecycle.
Only 19 per cent of business owners have identified a successor, yet just under one third of those have a transition plan in place, with training times varying greatly.
“Our research and experience advising business owners across Canada shows many are unprepared for the inevitable” said Sean Foran, Vice President of Succession Planning at BMO Harris Private Banking. ”Whether they intend to sell their business or hand it down to a family member, it's important they begin planning as early as possible to ensure they get the most out of the many years of work they have put into the business.”
Other Survey Highlights:
- Almost 40 per cent of respondents say their ideal succession plan would involve selling their business to an outside party.
- Only 17 per cent said they would sell the business to a family member.
- One quarter of respondents say they have no interested family members and 17 per cent say they have no family members who could take it over.
- 85 per cent of business owners say they are the first or second generation of the family that started the business.
“These findings reflect the mindset of a typical entrepreneur,” said Gail Cocker, Senior Vice President, Commercial Banking, BMO Bank of Montreal. “Most business owners are so focused on growing and maintaining their business they find it difficult and even emotionally draining to contemplate selling or winding it down. Our best advice is to speak to one of our commercial bankers. They can provide guidance and direction on how to put a succession plan in place. “
Business owners are overwhelmingly intent on using the proceeds from the sale of their business as investment dollars. In fact, two-thirds of business owners surveyed say they will invest their business sale dollars — nearly the same number who intend to fund their retirement through RRSPs or other investments. However, 61 per cent intend to rely in part on the Canada Pension Plan to get them through their retirement years.
“Clearly some entrepreneurs are concerned the sale of their business will not sufficiently subsidize their retirement lifestyle,” said Foran. “That's why it's important they maximize the proceeds of the sale of their business by investing that money wisely with the aid of a professional advisor.”
Almost three-quarters of those surveyed are more than five years away from selling their business, providing ample opportunity for a carefully planned exit strategy.
The new found data comes on the heels of the recently released book, Succession Stories from the Front Line: Insights and Advice for Canadian Business Owners, a compilation of real-life succession planning stories by Sarah Kruger and Sean Foran that analyzes the complexities of handing over a mature business. More information about the book and dates of a national seminar series can be found at www.bmo.com/succession. In addition, business owners can listen to Sean discuss the importance of succession planning with PROFIT Magazine's Ian Portsmouth by downloading for free episode four of the Business Coach Podcast series found on www.bmo.com/podcast.
The online Harris/Decima poll was conducted from February 5th – 14th, 2008 and based on a sample of 400 Canadian business owners from across the country.
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