Report: Many entrepreneurs that plan to exit their company don’t increase business performance

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According to a new report from BDC, many entrepreneurs planning to exit their company are leaving money on the table by not investing in the company’s growth.

The report on business transitions was conducted with Nielsen, which surveyed 2,500 entrepreneurs. A big reason these entrepreneurs are thinking of selling their companies is due to retirement; sixty percent of Canada’s small and mid-sized business owners are aged 50 or older. Forty-one percent of Canadian entrepreneurs are likely to leave their businesses within the next five years but not acquire another.

The study says that these entrepreneurs are underestimating the time needed to complete the transition to new owners and management and sell at the optimal price. Seventy-one percent of all sellers are reportedly reluctant to take risks to improve their business’s performance and 52 percent have little interest in expanding their business.

“As for a homeowner putting a house up for sale, entrepreneurs want to realize the highest possible return on selling their business, most often their biggest retirement asset,” said Pierre Cléroux, Chief Economist at BDC. “Our study points out that by not properly preparing and improving company performance, some Canadian entrepreneurs are leaving money on the table.”

The study finds that four out of ten Canadian entrepreneurs intend to sell their businesses, up from one in three in the mid-2000s. There is also difference when it comes to SMEs of 20 employees or more. A very small proportion of these owners (only 3 percent) intend to liquidate their business, in comparison with all respondents (22 percent). They are also more willing to grow and seem better prepared to maximize business value. These business owners also have a more realistic idea of the time that the transition process will take.

“Our findings do not augur well for overall business investment in Canada,” adds Pierre Cléroux. “However, some strategies can boost sale price and minimize transitioning hurdles; these tips are particularly relevant, as we are entering a period when sellers will most probably outnumber potential buyers,” he concludes.

Jessica Galang

Jessica Galang

Freelance tech writer. Former BetaKit News Editor.

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