Lack of Small Business Succession Planning Endangering Economy: Banker

Having a succession plan is absolutely crucial to the survival of a small business, yet fully two-thirds of small business owners have failed to address this need, according to Bill Downe, Deputy Chair, BMO Financial Group and CEO of BMO Nesbitt Burns. Speaking July 11th before the Rotary Club of Saint John, Mr. Downe said that explains why only one in three small and medium sized enterprises (SMEs) survives the transition to a second generation, and only one in ten the transition to a third generation.

“This represents a serious concern when so much of our economy depends on SMEs,” Mr. Downe said. “Between 80 per cent and 90 per cent of all companies in Canada are small to medium-size businesses. They generate nearly half of the country’s GDP and are responsible for six million jobs,” he said, adding that SME’s employ more than half of employees in New Brunswick.

“The loss of any company, regardless of its size, has an economic and social impact on employees and communities. Jobs, expertise, experience, business networks — all are irretrievably lost when a company shuts down.

Clearly, we all have an interest, directly or indirectly, in the orderly succession of these businesses,” said Mr. Downe. Pointing to last month’s survey of the Canadian Federation of Independent Business that found that 7 out of 10 SME owners intend to exit their business over the next ten years, Mr. Downe urged small business owners to develop a succession plan. “Most small business owners have a huge emotional investment in their business and often worry that no one will do the job like them,” he said. “It’s such a difficult thing to do, but I can’t say it often enough: the succession planning process must not be guided by those emotions.”