Canadian small business owners ill-prepared for retirement

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Owners; Canadian SMBs Unprepared for Retirement

More than 75% of small and medium-sized businesses could change hands over the next decade.

More than 75% of Canadian SMEs could change ownership over the next decade. (Archives)

Three-quarters of small business owners in Canada plan to retire within the next decade. Yet less than 10% have a succession plan in place to ensure the transfer of ownership is successful. A lack of planning that could have unfortunate consequences for jobs and the economy in the country.

The Canadian Federation of Independent Business (CFIB) released a report on Tuesday on business succession in Canada. The organization predicts that within 10 years, 76% of small business owners will retire. Some $2 billion in business assets will change hands.

The CFIB stresses the importance of properly planning a transfer of an SME, not only to ensure the sustainability of the business and the maintenance of the jobs associated with it, but also to guarantee the seller sufficient retirement income.

Despite the benefits and assurance that a succession plan provides, CFIB finds that only 9% of business owners have one in writing. And nearly one in two small business owners (46%) still don't have a plan, whether it's written down or not.

This is a situation which, for many SME managers, could prove to be stressful and costly if they ever divest themselves of their business without having properly assessed the value of the business and how it is doing. get rid of it, warns in an interview with Radio-Canada Jasmin Guénette, vice-president of national affairs at the CFIB.

Jasmin Guénette insists on the importance of properly planning the transfer of an SME. (Archives)

Bankruptcies, Job Losses, Business Closures, Decline in Productivity, Shutdown or Disruption of Services in Affected Sectors: The Economic Problems Associated with Poor Management of property transfers are numerous, warns the CFIB.

The lack of formal planning is worrisome, as it could seriously compromise Canada's competitiveness and prosperity. And with [$2 trillion] in assets potentially changing hands in the next 10 years, the Canadian economy can't afford to have so many ill-prepared SME owners for the transition, its report reads. .

“Small business owners very often rely on the sale of their business to fund their retirement. So, it is important to plan the sale of your business well in order to be able to enjoy your retirement. »

— Jasmin Guénette, Vice President National Affairs, CFIB

CFIB argues that a plan prepared with the help of various advisors (lawyers and accountants, in particular) who are familiar with the technical aspects of a business transfer in financial, tax and legal terms can avoid a transition from improvised torch.

A well-prepared plan also helps the owner to find a buyer, to properly determine the value of his business and to avoid unpleasant surprises, in particular the taxes he will owe pay at time of sale.

These are higher if he sells to a family member than to a stranger.

The problems of succession do not spare the agricultural sector. It is estimated that in Canada four out of five farms do not have a successor identified to resume activities. (Archives)

CFIB has launched a specialized web page offering resources for small business owners to help them plan for their succession and find a buyer. It also created the Succession Planning Program.

In addition to encouraging small business owners to plan their retirement well, CFIB urges governments to facilitate the transfer process.

It asks them, among other things, to reserve the same tax treatment for intergenerational transfers as for transfers to a third party.

Our output [ also targets] legislators to ensure the legal, legislative and tax framework is as simple as possible, and promotes the transfer of businesses so that it is profitable and easy for the current owner to sell, and that it is also simple for potential buyers to buy existing SMEs, explains Jasmin Guénette.

With the collaboration of Colin Côté-Paulette

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