Canadian financial institutions need to devote more time and more resources to help retiring entrepreneurs develop and successfully execute succession plans, says the new president of the Business Development Bank of Canada (BDC). This to ensure their businesses stay in operation after they leave them.
Jean-René Halde, who took over the top job at BDC in June, maintains the absence of efficient succession planning is one of the most serious issues facing the Canadian economy.
He noted that while, understandably, a lot of attention has been focused on the impact of Canada's aging population on the health-care system the importance of transferring small and medium-sized businesses from the hands of aging entrepreneurs to the next generation is another huge challenge. According to Mr. Halde the numbers speak for themselves.
A recent study by the Canadian Federation of Independent Business states that 70 per cent of Canadian entrepreneurs will retire in the next 10 years. Of those retiring over the next 5 years almost half do not have a succession plan. By all accounts that is an alarming statistic. The same study states that as many as 2 million jobs in Canada depend on successful business transition.
"The first wave of retirements has begun and in fact will accelerate over the next 5 years," said Halde, who brings to BDC over 20 years of experience in business, finance and corporate governance at companies of various sizes. "One of our roles in the years ahead is to make people aware of the need to plan this transition ahead of time. Planning is everything. It can't be a last-minute decision."
"Financing is one thing but expert help is essential in getting any successful transfer plan off the ground," said Halde. "Studies back this up – when a good plan is in place and when there is good execution, the business not only goes on, it grows."
If business owners are soon reaching retirement age it stands to reason that their workforce is as well. Increased international competition also makes for significant skilled labour shortage. The Canadian manufacturers and exporters association recently did a survey that found that 46 per cent of entrepreneurs said the availability of skilled workers was their greatest area of concern. In fact over the next 10 years it is estimated that Canada will see 500,000 skilled workers leave their jobs. Replacing this workforce in a relatively short period of time is far from automatic. Planning is once again an essential part of coping with an ever increasing skilled labour shortage.
According to Halde, an institution like BDC can help businesses plan and finance strategies to deal with succession planning as well as the current labour climate in the short, medium and long term. After all, BDC is in business to help Canadian entrepreneurs meet their challenges.
Halde said he accepted the job at BDC because the bank truly "makes a difference" for many small businesses and their owners. For instance, 60 per cent of all BDC loans are for $250,000 or less.
"Our mandate is to help these businesses and play a complementary role to other financial institutions by filling gaps in the market," he said. "I honestly think this organization has made a difference. I've heard many entrepreneurs tell stories about how they wouldn't be in business if it hadn't been for BDC. Knowing the aging population issue will impact many of those same businesses sends a clear message. Once again BDC will help by making a difference."
He called small business the "engine of the economy," noting that SMEs generate by far the greatest number of jobs. And he singled out young entrepreneurs for praise as an important force.
"Every year during Small Business Week we honour the success of young entrepreneurs because they represent the rejuvenation of the economy and that's a fundamental growth factor," he said. "The new entrepreneurial talent is right here and ready. BDC wants to continue to encourage those who will make the difference in the future especially since more than ever, the future is now."
For more information, call 1 877 BDC-BANX (232-2269).
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