More than 40% of Canadian entrepreneurs will exit their businesses to retire in the next five years, finds a study by BDC. And 52% of them expect to sell or transfer their businesses outside the family.
Problem is, many business owners won’t make the most of the transition.
“Our study points out that by not properly preparing and improving company performance, some Canadian entrepreneurs are leaving money on the table,” says Pierre Cléroux, chief economist at BDC, in a release.
The study highlights that entrepreneurs need time to prepare for transition and to sell at the optimal price. But business owners underestimate the time they require to plan.
Further, 71% of all sellers are reluctant to take risks to improve the performance of their businesses, and 52% have little interest in expanding their businesses.
“Our findings do not augur well for overall business investment in Canada,” says Cléroux in a release. This could be especially true considering almost 60% of Canadian small and mid-sized business owners are aged 50 or older, and a wave of retirement will create a boom in business transitions.
The BDC study offers entrepreneurs six steps to enhance the value of their businesses, including pursuing growth, having reliable financial reports and tapping professional networks to find high-quality buyers.
The study, conducted in partnership with market-research firm Nielsen, was conducted in two phases. Fifteen in-depth interviews were conducted in December 2016 with entrepreneurs who had left their firms during the previous two years. Also, Nielsen conducted a telephone survey in March and April 2017 on succession and acquisition intentions among Canadian businesses with 1 to 499 employees.