As Canada's economy faces uncertainty and rising tariff disputes, small businesses are confronting a wave of closures, partly due to the retirement of Baby Boomer entrepreneurs, according to the MNP’ Succession Readiness Report.
Small businesses, including small farms with agri-businesses, make up 98.1% of all Canadian employer businesses, employing nearly half of the private sector workforce. With many business owners nearing retirement age, succession planning has become essential to ensure a smooth transition.
A report from Statistics Canada highlighted that the average age of business owners in 2020 was 53.5, with many now nearing retirement. The data shows a decline in business dynamism, with fewer new entrepreneurs entering the market to replace those leaving.
This trend is especially concerning in sectors like agriculture, where 40% of farmers are set to retire in the next decade, says the report. A significant amount of farmland—worth approximately $53 billion—is expected to change hands, yet most farms lack formal succession plans.
Without proper planning, there is a risk of losing independent farms, leading to greater consolidation of food production and challenges to food security.
This issue is most pressing in rural and small-town Canada, where 98.6% of businesses are locally owned. These communities depend heavily on agriculture, as well as construction, and retail trade. Without proper succession plans, small businesses face labour shortages and may struggle to retain skilled workers.
Succession planning offers a way to protect local businesses and communities. Strategies such as family succession, employee ownership, or third-party sales can ensure that businesses remain community-owned and continue to contribute to the economy.
Employee share ownership plans (ESOPs) and employee profit-sharing plans (EPSPs) are tools that help business owners transfer ownership to their workforce, fostering wealth-building opportunities and ensuring the business's long-term success.
As the wave of retirements continues, early succession planning is crucial to securing a business’s future and maintaining local economic stability. It is essential for owners to seek professional advice to navigate these transitions and avoid financial uncertainty.