Dear Minister Chagger, congratulations on your new appointment! You are in charge of a very important portfolio. Small business is the backbone of our economy. According to Statistics Canada, 98% of all Canada’s businesses are small. They make up 77.7% of all private company jobs, 23.9% of Canada’s exports and 43% of our GDP.
Unfortunately, it’s a vulnerable backbone. Small business, which includes many businesses in the tourism industry, is in serious trouble. Many of the owners of these businesses are a stone’s throw away (or closer) from retiring. Nearly 60% are over 50.
Already in small towns across the county we see the evidence of this problem. Many shops on Main Streets are closed or for sale—the previous owners waited too long, didn’t make their business sustainable, didn’t find a buyer, or just got tired and gave up. An American Express survey indicates that 41% of owners plan to close their business rather than attempting to sell it. How many of those ventures might be saved if the owners had a strategy for making them sustainable and finding a buyer?
We just heard about Kraft Heinz closing in St. Marys, Ontario, costing the small town over 200 jobs. That’s bad enough, but the ripple effect is worse. Small suppliers to Kraft Heinz (printers, farmers, mechanics) and the suppliers to those suppliers (local restaurants, advertisers, and grocery stores)—all will be impacted. Those with owners close to retirement may simply close. This scenario is playing out every week across the country.
Why do you need to be concerned about this? When you consider the disappearance of value on several levels, the impact is huge. A modest company that does $1 million in sales feeds the owner’s family and maybe ten or so families of employees, pays corporate income tax, federal and provincial income tax, Employee Health Tax, Employment Insurance, HST, property tax, and probably WSIB. When a business owner retires and walks away from that business, he or she reduces tax revenue by hundreds of thousands of dollars every year. Yet there has been no acknowledgement from any level of government that this problem exists. There is no support for business owners to help them manage and successfully transition at this critical juncture of their lives.
It’s not all doom and gloom. Some business owners are reinventing themselves and/or their businesses to adjust to the changing times. They are retraining their employees, increasing productivity, growing sales, building leadership skills, improving their profitability, and planning for their transition. Unfortunately, these entrepreneurs are in the minority—less than 20% have any plan at all.
Small business needs your help. Here are a few ideas for your consideration:
• Investigate the problem of business succession seriously. There’s a tsunami of businesses that are about to go through some form of transition. Help them choose the best path.
• Give them information to solve the problem, not money. Help them to see the impact that today’s decisions will have on their retirement, their employees, their families, and their community. You’ll have to repeat the message frequently—many business owners are in denial.
• Offer or encourage training and coaching that will help entrepreneurs develop transition strategies, make better decisions and take action before they run out of time and options.
• Offer innovative financing programs that encourage first-time entrepreneurs to purchase a business as a going concern instead of for parts and inventory and for pennies on the dollar.
• Support the co-operative movement, because it’s encouraging employees to buy out their retiring employers.
You have a big portfolio with lots of challenges and opportunities. I know this is only one of many, but I hope you will see the need to act on this critical issue so we can turn these challenges into viable opportunities for younger entrepreneurs.
Wayne Vanwyck is the founder of The Achievement Centre International in London, Ont. He is the creator of The Business Transition Coach Forum and the author of the best-selling books, Pure Selling and The Business Transition Crisis. He has been training and coaching business owners for the past 30 years.
MORE BUSINESS TRANSITION TRENDS:
- Why You Need to Sell Now to Beat the Boomers »
- How to Avoid Being Swept Away by the Transition Tsunami »
- Why It’s a Lousy Time to Sell Your Business »
- Too Many Family Businesses Have No Succession Plan »
- Why Succession Matters More than Ever »
How else can the new federal government support entrepreneurs and small businesses? Let us know by commenting below.