Exit Strategies of Canadian SME Owners Hindered By COVID-19 Pandemic Challenges
The COVID-19 pandemic may not be as all-consuming in the lives of Canadians as it once was. However, some of its challenges and negative impacts continue to linger and impact individuals across the country. In fact, seven percent of small and medium-sized enterprise owners have begun planning their exit strategy from their businesses within the next 10 years. According to the Canadian Federation of Independent Business (CFIB), over two trillion dollars in business assets are vulnerable due to this mass exodus of small business entrepreneurs.
The majority of these SMEs have mentioned retirement as their reason for exiting their businesses (75%). Retirement is not the basis for leaving the company for other company owners. Others plan to depart due to the stress of the business (22%), the decision to take a much-needed step back from the daily responsibilities required from a business owner (22%), or to transition to a different type of industry or enterprise altogether (9%).
“It’s essential for business owners to have a well-planned exit strategy. With over $2 trillion set to be in play in the next 10 years and only a fraction of business owners having a formal succession plan, the risks of improper planning can be big,” said Corinne Pohlmann, senior vice-president of National Affairs at CFIB. “Planning for business succession is a key factor in ensuring that Canada continues to have a healthy small business community.”
Exiting Is on the Minds of Business Owners, But It’s No Easy Feat
Exiting is not always the ideal choice for any business owner nor the easiest. One of the most common obstacles they face is finding an appropriate successor or buyer for their company. Almost half of all entrepreneurs (43%) find it challenging to measure the value of their enterprise while (39%) believe their business is far too dependent on the owner for daily operations.
The federal government passed the Bill C-208 law in 2021 which allowed SME owners that sell their business shares to their offspring to take advantage of the exemption of lifetime capital gains on the earnings of a sale. However, the bill did not have endorsement from the Liberal government. The CFIB report also found that businesspeople often want to start their own business from scratch instead of purchasing an existing one with 49% choosing to develop a brand-new enterprise.
The pandemic ignited new-found challenges for business owners that profoundly impacted their companies in the long term. In fact, 56% of enterprise holders revealed that their business continues to make less than normal revenues into 2023, 64% are still struggling with post-pandemic debt and 77% continue to experience pandemic-related anxiety. Approximately four in 10 business owners have adjusted their business-exit date due to the pandemic with 17% accelerating their date of leaving and 22% delaying it by a year.
To learn more about how SME owners can connect with potential buyers, visit CFIB.ca.