Nearly two-thirds of Canadian small business owners plan to leave their businesses within the next decade, but just 6 per cent have a formal succession plan, putting more than $2 trillion in business assets at risk, according to a new report from the Canadian Federation of Independent Business (CFIB).
The report, released Thursday, says 63 per cent of owners expect to exit their businesses over the next 10 years, with retirement the primary reason. The findings highlight the challenge of transferring ownership to a new generation of entrepreneurs as business exits have outpaced new business entries in Canada since early 2024.
The CFIB is calling on governments to introduce measures to make business transitions easier, including tax changes, improved access to financing for prospective buyers and programs to connect retiring owners with potential successors.
“Canada is in an entrepreneurial drought. With a wave of owners preparing to exit, we can’t afford to lose viable businesses because of the difficulty in navigating ownership transitions or finding someone to take over the business. That’s a huge blow to the economy, and it puts jobs and local services at risk,” said Corinne Pohlmann, the organization’s executive vice-president of advocacy.
“A successful handover keeps a business open and brings a new generation of entrepreneurs into the economy, which is why governments need to pay attention and help make it easier to buy and sell a business.”
Finding buyers a major obstacle
Retirement accounts for 78 per cent of planned business exits, according to the report. However, other factors are also prompting owners to consider leaving, including burnout or stress, cited by 21 per cent, and high operating costs, cited by 20 per cent.
About 13 per cent of owners expect to close their businesses entirely, a proportion that rises to 17 per cent among retailers.
Finding a buyer or suitable successor is the most frequently cited obstacle to succession planning, identified by 47 per cent of owners. Being too busy to plan and difficulties determining the value of a business were each cited by 37 per cent.
The findings suggest that many businesses could face challenges finding new owners even when their current operators intend to sell rather than close. The lack of formal succession plans may also leave owners with fewer options as they approach retirement.
“Many business owners count on selling their business to fund their retirement. If they can’t find a buyer, they may have to delay retiring or close the business altogether,” said Marvin Cruz, CFIB’s senior director of research.
“A succession plan is the best way for owners to protect what they’ve built, and the earlier they start, the more options they’ll have.”
Owners weigh succession options
Most owners planning to exit expect to sell their businesses to someone outside their family, with 54 per cent identifying an unrelated buyer as their intended successor. Another 28 per cent plan to sell to employees.
Family transitions also remain an option for many owners. The report found that 21 per cent intend to sell their businesses to a family member, while 19 per cent plan to transfer ownership to a family member.
The figures indicate that owners may pursue more than one approach to succession, with sales and transfers forming part of the potential transition paths identified in the report.
Maintaining Canadian ownership is also a priority for many business owners. Seven in 10 respondents, or 72 per cent, said keeping their businesses Canadian-owned was important, including 68 per cent of those planning to sell outside their families.
Owners also placed considerable importance on protecting employees and maintaining their businesses’ community roles. Some 87 per cent said protecting employees was a priority, while 79 per cent emphasized continuing to support their communities.
“There is an enormous opportunity for the next generation of entrepreneurs to acquire an existing Canadian business, but they risk missing out without more government action to promote opportunities that come with buying an existing business,” Pohlmann said.
CFIB calls for policy changes
The CFIB is asking governments to take several steps to encourage business succession and help prospective buyers acquire established companies.
Its recommendations include increasing awareness, particularly among young entrepreneurs, of the opportunities and advantages of purchasing an existing business. The organization also wants governments to add a dedicated Business Succession Stream to entrepreneur immigration programs.
On taxation, the CFIB is calling for changes to capital gains rules, including a lower 33 per cent inclusion rate on the next $2 million of gains beyond the Lifetime Capital Gains Exemption.
Other proposals include raising awareness of Employee Ownership Trusts as a succession option and creating a secure marketplace to connect business owners preparing to exit with vetted successors. The proposed marketplace would be modelled on Repreneuriat Québec.
The organization is also urging governments to explore ways to help first-time business buyers obtain financing, similar to existing supports for first-time homebuyers.
The recommendations are intended to address barriers that can prevent viable businesses from changing hands, while creating opportunities for new entrepreneurs to enter the market by acquiring existing operations.
The report, titled Passing the Torch: How Canada’s Small Business Owners Are Planning Their Exit and Why the Next Generation of Ownership Matters, examines owners’ plans for leaving their businesses and the importance of transferring ownership to the next generation.
The CFIB describes itself as Canada’s largest association of small and medium-sized businesses, with 103,000 members across industries and regions.
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