Workplace Challenges
Carefully planned exit strategies key for medium-sized businesses, says studyPassing the torchIt's no secret that a large percentage of Canada's small businesses will change hands over the next decade -- analysts have been saying that now for several years. |
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 [ 2007-07-29 ] |
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However, new research suggests that half of all medium-sized, owner-managed businesses in Canada also expect an ownership transition over the next decade -- something that could put stress on the workplace, employment figures and the economy itself.
A study by Grand Thornton International shows that 28% of privately held businesses around the world are expected to change hands within the next 10 years. In Canada, the percentage is far greater at 50%, eclipsed only by South Africa at 52% and New Zealand at 51%.
"Our findings show an overwhelming expectation of change in the structure of privately held businesses in the coming years," says Alex MacBeath, CEO of Grant Thornton LLP in Canada. He's also the global leader of privately held business services for Grant Thornton International.
"With this in mind," says MacBeath, "business owners need to start planning for the future and take professional advice on how to best plan an exit from the enterprise," he says.
Grant Thornton is a world-leading organization of independently owned and managed accounting and consulting firms, which provides assurance, tax and specialist business advice to privately held businesses and public interest entities.
MacBeath says his company is seeing a trend in the more established western economies of businesses coming to the end of their current life cycle -- a trend that he says will extend to less developed economies in the coming years.
IMPLICATIONS
The implications for Canada, the study says, is that according to Statistics Canada, nearly one-quarter of the workforce is employed in a medium-sized enterprise.
Uniquely, Canada is also expected to have a relatively high proportion of owner-managers who intend to maintain family ownership. More than 30% expect the transition to stay within the family -- that's more than double the global average of 15%.
Jim Mills, Grant Thornton's national leader of family enterprise, says this may have something to do with the size of Canada, the nature of its communities and the nation's tax structure.
"Canada is essentially a large country made up of a lot of small communities. These communities breed family businesses -- and those businesses are the engine that drives the Canadian economy," says Mills.
"The Canadian tax system, properly applied, makes succession relatively painless. That paves the way for non-traditional familial success options."
Grant Thornton surveyed 7,200 business owners in 32 countries in its annual study, the first of which was completed in 1992.
CREATIVITY
"There are more creative alternatives for a partial sale of the business available today than ever before," says Andy Langer, a partner with Grant Thornton Corporate Finance.
"Such a structure can facilitate some degree of capital protection, or taking some cash off the table, while providing opportunity and capital for the ongoing growth in the business, which may be especially critical if some degree of family ownership is an important element of the future," he says.
MacBeath agrees, but stresses that with so much at stake, business owners need to plan -- as far in advance as possible -- for their enterprise's transition, especially in this country.
"When we consider the number of these businesses, and their importance to the Canadian economy, the successful planning for ownership transition is of national concern," he says.
"Regardless of how today's owner-managers choose to exit their businesses, they owe it to themselves, their employees and stakeholders to ensure the best possible outcome for everyone through wise planning and expert counsel," says MacBeath.
For more information on Grant Thornton, go to grantthornton.ca.
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