Close to half of all Canadian small-business owners plan to sell or otherwise exit their ventures in the next decade and a substantial number of those are not very prepared, according to a Scotiabank survey released this morning.
The bank's survey found 48 per cent of small-business owners plan to sell their companies within the next decade, and 45 per cent of those surveyed planned to sell within the next six years. Of those who plan to exit their businesses within the next six years, 43 per cent were not well prepared, the bank found.
Nearly a quarter of those surveyed (24 per cent) said that they did not yet know when they plan to sell or transition ownership, according to the bank.
The bank's survey was done by Maru Public Opinion and data collection experts at Maru/Blue. It included 663 financial decision makers at Canadian businesses that have annual revenue between $50,000 and $5 million. The survey was conducted between July 12 and 22, 2024.
The top answer provided when asked what the small-business owner wanted to do with the business after retirement or an exit was to keep the enterprise in the family (36 per cent). That was followed by exiting the business and shutting it down (15 per cent), selling the business to a larger company (12 per cent) and selling the business to a non-family employee (10 per cent) or a non-family, non-employee (10 per cent.) When surveyed about this, 15 per cent of small-business owners did not know what they planned to do when they exit.
The top reasons for not having a plan in place were that it is not a priority (40 per cent), they did not think they needed one (33 per cent) or they simply have not thought about it yet (33 per cent), according to the survey. Respondents were able to provide more than one answer.
“Often, when a young person takes over from those nearing retirement, it’s a family business,” said Yacoup Boumali, a Scotiabank small business advisor. “These businesses typically have a legacy of being passed down through generations.”
The survey asked small-business owners about enhancing the digital side of their businesses, or improving performance due to upgrades in hardware, software and cybersecurity protection.
“Digitalization is not only an industry issue. It’s a generational issue,” said Boumali. “When speaking to clients about digitalization, there are challenges with the older generation who aren’t comfortable online. There’s a lack of trust there and it’s hard to change their mind.”
Millennials are sometimes adept at transforming businesses digitally, almost flipping them for increased value – much like updating and reselling a house for profit, Scotiabank's report said.
Ultimately, selling businesses that are less digitally mature usually means leaving money on the table, said the survey, which was named Navigating the Future: Succession and Success in the Digital Era.
