A wave of baby boomers retirements is putting Okanagan entrepreneurs at risk. With a staggering 80 per cent of owners failing when trying to sell their company, Business Finders Canada is urging small businesses to plan their exit, protecting both profits and people.
“This is an alarming statistic; I have met far too many people who think they can wake up one morning, decide to sell their business and go out and do it,” says Steve Harvey, CEO of Business Finders Canada. “Unrealistic valuation and owner’s expectations can throttle a potential sale and owners are forced to close their doors. It’s hardly the exit plan any owner would desire and the impact on the local economy can be substantial.”
Canada is at risk for a massive closing of doors with the majority of the 1.08 million small and medium-size enterprises owned by baby boomers. In 2012, CIBC reported that 310,000 business owners would exit ownership or transfer control of their businesses within five years. Within the next ten years, business exits will grow to 550,000. BC will see the largest transfer of ownership with no less than 40 per cent of businesses expected to change hands before the end of the decade.
“In the Okanagan, approximately 200 businesses were listed through the Okanagan Mainline Real Estate Board last year, yet only 32 sold; that’s only a 16 per cent sell-through rate,” says Harvey.
Getting ready is paramount, says Harvey, whose firm specializes in supporting owners through this time of transition. “Most people who own a business are focused on making it a great success; few of us spend much time thinking about winding down the business or transitioning it to someone else,” he says.
In the coming five years, an estimated $1.9 trillion is expended to change hands, yet CIBC reports that close to 60 per cent of business owners aged 55 to 64 have yet to start discussing exit plans with their family or business partners.
An exit strategy is what every investor looks for — and “must have” if a business owner wishes to get money out of their enterprise. With a proper valuation and positioning, a successful sale to another business or on the open market is realistic, says Harvey. For owners looking to leave a legacy, family succession or selling to employees can be the right exit strategy.
“You need to be honest and look at your business objectively and realistically,” says Harvey. “Having a professional valuation can help you consider your options, know your timelines and ready the businesses for sale.”
Owners can reach the certified business brokers at Business Finders Canada at 1652 Pandosy Street in Kelowna or online at businessfinderscanada.com