Letter signed by Michel Leblanc, President and CEO, Board of Trade of Metropolitan Montreal, and Gaétan Morin, President and CEO, Fonds de solidarité FTQ, and published in Le Journal de Montréal and Le Journal de Québec.
May 8, 2015
Building Quebec Inc. on solid foundations
SMEs are born, they grow, and often, they die. Indeed, in a dynamic entrepreneurial ecosystem, this is a typical life cycle for new businesses. New ideas and new business models do not all necessarily lead to success. Overall, in Quebec, close to two thirds of new businesses will close their doors before reaching their fifth year of existence.
While it is normal for several new SMEs to have a hard time getting established and staying around for the long term, those that do succeed in doing so must be able to continue to grow by building on the foundations they have put into place. However, this survival can—and must—entail outlasting another life cycle, that of the initial entrepreneur. This is where business succession—an entrepreneurial practice that should be further celebrated in Quebec—comes into play.
Business succession, simply stated, means building one’s business success on solid, established foundations. It is, in fact, a lot easier for a young entrepreneur to take over an already existing business than it is to start one from scratch. Furthermore, this allows the successor to preserve the value of the business built by its former owner, along with its history and its contribution to our society in terms of wealth and jobs.
That being said, business succession remains an option that the new guard does not take into consideration often enough, and success stories do not seem to get nearly as much media coverage as start-ups do. Yet, business succession is just as essential as entrepreneurship for Quebec’s economy of tomorrow.
Here are a few figures, looking forward over the next ten years, which should shed some light on the common issues SMEs will be facing if we don’t put enough emphasis on business succession:
- If the idea of business transfers fails to gain ground, between 5,700 and 10,000 Quebec businesses are at risk of closing down, which could result in the loss of between 79,000 and 139,000 jobs, and between 8.2 and 12 billion dollars in GDP.
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- 30% of Quebec business owners are planning to retire, and half of them have no desire to sell or transfer their business.
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- 83% of Quebec business owners feel they would need at least three years to complete the transfer of their business, while experts agree that an average of seven years is required.
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These figures, from a study we published last year, should concern us all. The 2015-2016 provincial budget notably promises to provide forms of tax relief for business transfers between affiliated individuals in the primary and manufacturing sectors. While this is a positive step, it would also be a good idea to implement measures that aim to facilitate all business transfers, if we want a greater response from the new guard.
It should also be noted that transferring a business involves multiple steps that greatly need to be simplified. To achieve this, we need to harmonize and coordinate the programs of organizations working in the area of entrepreneurial succession and business transfer. They currently tend to work in isolation. By combining their expertise, we would manage to cover the many facets of business transfers, which are as much of a fiscal and financial nature as they are of a psychological and human one.
By now you will have realized that the question of entrepreneurial succession and business transfer is more crucial than ever for the Quebec Inc. of tomorrow. Business succession must be one of the main options to consider when going into business, on the same level as entrepreneurship. We must work towards overcoming preconceived notions, continuing to raise awareness of the situation of business succession in Quebec, particularly among young professionals. The future of our SMEs is at stake.