What Canada’s aging population could mean for your succession plan

These statistics paint a very clear picture: as a significant number of business owners plan to exit their business in the next 10 years, nearly half are looking to sell, and the majority struggle with how to find a buyer that will meet their financial needs.

Additionally, a large number of businesses entering the market for sale in the next decade could translate to lower sale price, significantly impacting the kind of lifestyle business owners can expect or afford in their retirement.

This data aligns with MNP’s ExitSMART findings which show only eight percent of business owners say they’ve set clear and defined objectives for the future of their business. A vast majority, 62 percent, say they have not formalized a business plan to optimize their business’s worth, which could negatively impact their overall value.

Your key employees may be considering retirement too

An overlooked part of the value of your business lies in the key employees that help the organization function. Some buyers want to make sure that they’re taking over a business that will continue to operate effectively even after the owner has exited, and they rely on other senior leaders to help fill the gaps.

Canada’s aging demographic looms over this area as well. Are your key team members approaching retirement age? Some businesses are seeing mass retirements hit the top of their organizational charts and they’re caught unprepared to backfill those positions.

One way to overcome this challenge is to create a long-term talent development plan. This can help you prepare the next generation of leaders to improve stability in the organization and boost your retention efforts by creating a deeper tie between younger employees and the business.

Optimizing your succession plan to meet your needs

While it may be true that it’s better late than never to start planning for the future, when it comes to succession planning, the more time you have, the better.

Here are a few key steps to take to ensure you understand your financial situation and can make the right choices for what your future will look like:

• Get in touch with a Chartered Business Valuator (CBV) who can assess your business and determine what it’s worth.
• Have a qualified advisor work with you to evaluate at your assets, including the sellable value of your business.
• Formulate a financial roadmap for retirement – how much money do you need to live the lifestyle you want, and can you sell your business for a price that will help you reach those goals? Knowing your number can be a powerful tool at the negotiating table to help know when and what to push for.
• Determine if there is work that can be done to optimize your business and make it more attractive to buyers/ increase the sale value when the time comes.
• Figure out an exit strategy that makes the most sense for you and your business. Do you need or want to be involved in the transition of ownership? If so, when does that process need to start?

Whether you’ve already started putting your succession plan together or haven’t begun to think about the future, understanding how outside forces can impact your future is vital.

MNP’s ExitSMART assessment can help you determine next steps, no matter where you’re at in the process, and walks you through emergency planning, a value enhancement plan, and tax and estate planning, among others.