Majority of businesses are not prepared for leadership change

​There is a topic that is often not discussed or planned for until late in the process – succession.
 
Here at the Chamber of Commerce we often have conversations with businesses who are thinking about selling their business. It’s something that has hit them fairly recently. They’re tired. The last few years have been a lot. They want to look after their mental and physical health. They’re getting older and want to spend time traveling and hanging out with the grandkids. It’s all understandable and, frankly, they’ve earned it after years of long hours, high stress, and financial risks.
 
The problem is they’re tired right now. They’re hoping to get out some time in the next 12 months or so.
 
There’s a new report on this subject from the Northern Policy Institute in partnership with the Ontario Chamber of Commerce and Société Économique de l’Ontario called Taking Care of Business: The State of Business Succession and Planning in Ontario.
 
The report’s survey found that 73% of business owners do not have a succession plan in place, even though the leaders of many organizations plan to sell or retire soon. Most business owners report planning to sell or retire in the next 15 years.
 
From Taking Care of Business: The State of Business Succession and Planning in Ontario:
Business Owners’ Responses to “Do you have a succession plan in place?”
-I don’t know/prefer not to answer: 9%
-No, we do not have a succession plan in place nor have one in the process of being created: 44%
-No, but it is in the process of being created: 29%
-Yes, one is completed: 18%
 
The transition of business ownership represents both opportunity and risk. Established businesses provide a strong platform for someone to continue to grow. But poorly planned succession can be a mess.
 
The report notes that one-third of business owners who plan to sell or retire in the next five years do not have a succession plan in place or are in the process of creating one. Organizations who are not anticipating a change of leadership are far less prepared. Smaller businesses are typically less prepared, despite being more likely to undergo leadership change.
 
There is a cost to putting off planning for change, as stated in the report:
“Poorly managed succession can lead to worse organizational performance and lost business value. This can result in reduced economic growth, job losses for employees, and reduced options for consumers. Therefore, increasing the number of businesses that adequately plan for succession will be crucial to ensuring that Ontario’s successful existing businesses continue to provide employment opportunities, goods and services, and economic growth even as their current leadership departs.”
 
While we typically talk about succession planning as it relates to retirement, which is a big component of it, businesses change hands for multiple reasons. Some move on for a change of scenery, but there are also unexpected and unforeseen changes due to health issues, death, family needs, financial issues, business partnership breakdowns, etc. Having a plan on the books will go a long way to making that transition process go more smoothly.
 
Good planning will help preserve local businesses and create a stronger local economy. If you or your organization are interested in planning for changes in leadership and ownership, your local Chamber of Commerce can help make some recommendations on local businesses with succession expertise. The best time to plan for the future is now.