Small business succession in BC: the retirement wave
Most owners plan to leave within a decade, and few have a written plan. That gap shapes the market for sellers and buyers alike.
Photo by Matt Hanns Schroeter on Unsplash
Small business succession is about to become one of the busiest parts of the BC economy. A large share of owners expect to step away within the next decade, and most of them have not written down how.
That is not a reason for alarm. It is a reason to plan. The owners who prepare will have more choices about who takes over, on what terms and when. The ones who wait will find that their timing is set by health, fatigue or the market rather than by them.
The numbers behind the retirement wave
The Canadian Federation of Independent Business (CFIB) surveyed owners for its 2023 report on succession. It found that over three-quarters (76%) of small business owners are planning to exit their business within the next decade. CFIB estimates that over $2 trillion in business assets could change hands in that period. Retirement was the most common reason, cited by 75% of those planning to leave.
The age profile points the same way. In the federal Survey on Financing and Growth of Small and Medium Enterprises for 2023, 60% of primary decision makers were 50 years of age or older.
British Columbia has a large stake in this. Innovation, Science and Economic Development Canada counts 170,512 small employer businesses in BC as of December 2024, the most in Western Canada. The CFIB figures are national, but there is little reason to think BC owners are younger or better prepared than the rest of the country.
Few owners have a written plan
The striking finding is not how many owners plan to leave. It is how few are ready. CFIB found that only 9% have a formal business succession plan. The rest either have an informal plan or none at all.
An informal plan usually lives in the owner’s head. It might be “my daughter will take it over” or “a competitor has always wanted to buy us”. Neither is a plan until someone has tested it: whether the successor wants the business, whether the buyer can finance it, and what the business is worth to either of them.
Why sellers need more time than they expect
CFIB asked owners what stood in their way. The top three obstacles were finding a suitable buyer or successor (54%), measuring the value of the business (43%), and a business too reliant on the owner for day-to-day operations (39%).
Each of those takes time to fix.
Finding a buyer. Family members need years to learn the business, if they want it at all. Employees need time to organize financing. Outside buyers need to find you, and a business that is not ready for scrutiny will lose them in due diligence.
Setting a value. Owners often carry a number in mind that has little to do with what a buyer can pay from the business’s cash flow. Closing that gap usually means improving the business, not arguing about the price.
Reducing reliance on the owner. A business where the owner holds every key customer relationship, approves every quote and knows where everything is filed is hard to sell. Buyers pay less for it, or ask the owner to stay on for years. Building a second layer of management takes time.
The owners who prepare will have more choices about who takes over, on what terms and when.
What the retirement wave means for buyers
For buyers, more owners leaving should mean more businesses to choose from. Investors, entrepreneurs, newcomers to BC, competitors and Indigenous development corporations are all potential buyers of established businesses. Choice is not the same as quality, though. Many businesses coming to market will not be ready, and some will not be sound.
Due diligence is where buyers find out. The Business Development Bank of Canada (BDC) advises buyers to review accountant-prepared financial statements for at least the past three to five years, along with tax returns, bank statements and records on margins, customers and receivables. BDC notes that due diligence for a business acquisition can range from six to 12 weeks or longer, and that buyers should confirm that key contracts can be assigned to them.
Financing is the other test. Many deals are funded partly by the seller. BDC explains that vendor financing typically amounts to 10% to 15% of the transaction amount, with repayment usually over three to five years and payments often deferred for the first year. A seller who agrees to carry part of the price is showing confidence in the business. A seller who refuses is telling you something too.
Small business succession works better with advisers involved
CFIB found that 43% of owners turn to accountants for help with succession and about a quarter work with lawyers. Those are the right people for tax, structure and contracts. A succession also needs someone to look at the business the way a buyer will: the records, the dependence on the owner, the key contracts and the staff.
We do that work in our Deals & Investment practice, alongside the owner’s accountant, lawyer and a licensed valuator. We do not give legal, tax or valuation advice.
A practical first step
If you own a business and expect to leave it within 10 years, write down three things this month: when you would like to leave, who you think could take over, and what you believe the business is worth. Then ask your accountant whether the financial statements would support that value to an outside buyer.
The gap between your answers and your accountant’s is your succession plan’s starting point. Our page on business succession planning sets out the routes owners usually compare and the runway each one needs.
Sources
- “Over $2 trillion in business assets are at stake as majority of small business owners plan to exit their business over the next decade”, Canadian Federation of Independent Business, 10 January 2023. https://www.cfib-fcei.ca/en/media/over-2-trillion-in-business-assets-are-at-stake-as-majority-of-small-business-owners-plan-to-exit-their-business-over-the-next-decade
- “Summary of the Survey on Financing and Growth of Small and Medium Enterprises 2023”, Innovation, Science and Economic Development Canada. https://ised-isde.canada.ca/site/sme-research-statistics/en/survey-data-and-analysis/survey-financing-and-growth-small-and-medium-enterprises/summary-survey-financing-and-growth-small-and-medium-enterprises-2023
- “Key Small Business Statistics 2025”, Innovation, Science and Economic Development Canada. https://ised-isde.canada.ca/site/sme-research-statistics/en/key-small-business-statistics/key-small-business-statistics-2025
- “How to conduct due diligence when buying a business”, Business Development Bank of Canada. https://www.bdc.ca/en/articles-tools/start-buy-business/buy-business/buying-business-conducting-due-diligence
- “Vendor financing (VTB) for mergers and acquisitions”, Business Development Bank of Canada. https://www.bdc.ca/en/articles-tools/start-buy-business/buy-business/how-vendor-financing-can-help-your-acquisition
