Pandemic underscores urgent need for business owners to have a plan for succession and business transition
With ongoing uncertainty caused by the COVID-19 pandemic, more than a third (37 per cent) of business owners surveyed in Canada wish they could retire, transition or sell their business but are not prepared, finds a recent poll by KPMG in Canada.
"With the COVID-19 pandemic, many business owners have been forced to make tough decisions around investments needed to manage through the crisis and beyond," says Yannick Archambault, national family office leader for KPMG in Canada. "Given the ongoing challenges, more than a third wish they could sell or transition their business to the next generation today.
"But these kinds of decisions require serious planning and the persistent economic uncertainty posed by the pandemic has accelerated the normal planning timeframe for these decisions. As a result, there is a greater urgency today to have robust, forward-looking plans in place and solidify leadership and governance structures to protect the business and facilitate a transition."
Key poll findings:
To sell or transition the business
"For family business owners, the readiness of the next generation to assume control of the business is a key consideration when thinking of retirement," says Mr. Archambault. "Most business owners need to feel confident their business is in safe hands with the next generation or a strategic third-party, before making the decision to sell or transition the business. Overall, our poll findings reveal that 28 per cent of respondents are ready to retire or sell the business but feel obliged to stay on because their successor is not prepared to take over the business. This may or may not be a family member who has been involved in the running of the business."
"We also heard from entrepreneurs about the growing importance of technology, a lesson driven home by the realities of working during a pandemic. Most (78 per cent) of entrepreneurs said companies must go digital to compete and 70 per cent believe a more tech savvy generation of leaders is needed to succeed in the new business reality."
The future is digital
The poll also reveals that business owners who plan to exit within the next twenty-four months, but lack formal plans, have also made minimal investments in technology. In fact, 48 per cent of these owners said they've made no recent investments in technology. While only eight per cent invested in digital technology to facilitate online sales / services / payments, far below the national average of 27 per cent.
"Now more than ever, businesses need to be proactive and invest in digital and emerging technologies, whether to facilitate remote work or online sales, services and support," says Mary Jo Fedy, National Leader, KPMG Enterprise. "The prevailing belief that digital transformation is driven by the next generation of leaders could also influence future thinking about succession planning."
According to Ms. Fedy, the pandemic may have also put some transitions on hold because valuations are uncertain and different market dynamics are now at play. "Businesses need to be prepared for the unexpected."
Six Steps to a Successful Business Transition
About the KPMG Business Transition COVID-19 Poll
KPMG polled 500 Canadian companies in late September, when COVID-19 cases resurged in Canada. The online survey of business owners or decision makers was drawn from Delvinia's premier online research panel, AskingCanadians. Forty-six per cent of the respondents are aged 55 and over and 38 per cent are women.
About KPMG Family Office
KPMG Family Office provides independent advice and specialized services that are tailored to the unique needs of successful business owners and families. Our team can mobilize to engage as a partial or full-service family office, or collaborate with an existing family office, to complement capabilities and provide value-added services. With KPMG's national and global reach, we also understand the mobility of families and wealth today and are ideally positioned to advise on cross-border assets and complex, multi-jurisdictional business, tax and wealth matters.
About KPMG in Canada
KPMG LLP, an Audit, Tax and Advisory firm (home.kpmg/ca) is a limited liability partnership, established under the laws of Ontario, and the Canadian member firm of KPMG International Cooperative ("KPMG International"). KPMG has more than 7,000 professionals/employees in over 40 locations across Canada serving private- and public-sector clients. KPMG is consistently recognized as an employer of choice and one of the best places to work in the country. The independent member firms of the KPMG network are affiliated with KPMG International, a Swiss entity. Each KPMG firm is a legally distinct and separate entity and describes itself as such.
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