A new report from the accounting firm MNP warned that as "Baby Boomer" business owners retire, nearly two-thirds (64.1 percent) of Canadian entrepreneurs lack formal succession plans, threatening business continuity, job security, and economic stability.
According to the "Succession Readiness Report," small and medium-sized businesses (SMEs), which employ approximately 7.8 million people in the private sector, are particularly vulnerable to ownership shifts. MNP's findings suggested that a lack of planning could lead to increased business closures, job losses, and economic uncertainty.
According to the report, while many business owners have thought about their exit strategy, few have taken actionable steps. Approximately one in five (20.7 percent) have not considered succession, and fewer than one in ten (8.5 percent) have defined clear goals. This lack of planning threatens widespread consequences, especially since individuals nearing retirement own 62 percent of Canada's SMEs.
Kerry Smith, National Leader of Family Office Services at MNP LLP, emphasized the urgency of preparation. "We are witnessing one of the most significant wealth transitions in history as Canada's workforce ages and more small business owners approach retirement," Smith said. "For many owners, their businesses are not only the cornerstone of their financial futures but also a vital source of jobs and stability for their employees. The future of our communities and local economies hinges on these owners making strategic decisions and preparing for effective succession and exit planning."
The potential for business closures is already evident. According to Statistics Canada, the business closure rate increased to 4.8 percent in October 2024, surpassing the historical average of 4.6 percent.
Beyond ownership transfer, the survey found that many business owners have not identified key employees essential to continuity. Only 39.3 percent have considered which staff members are critical during a transition, while 23.3 percent have not addressed employee retention.
Smith stressed that planning can help avoid disruptions.
One solution gaining attention is Employee Share Ownership Plans (ESOPs) and Employee Profit Sharing Plans (EPSPs). These structures allow owners to transfer partial or full ownership to employees, ensuring business continuity while giving workers a direct stake in the company's success.
Despite these benefits, ESOPs and EPSPs remain underutilized. Smith noted they could help mitigate workforce retention, burnout, and unexpected health challenges among business owners.
"There has never been a better time for business owners to explore structured ownership transition strategies," Smith said. "These tools can help secure long-term business success while preserving jobs and supporting local economies."
The report found that less than half (48 percent) of business owners feel confident that their company's net value will align with their financial goals. Many have not sought professional advice to confirm their business valuation or succession strategy. Smith encouraged business owners to take proactive steps by consulting financial and legal advisors.