Montréal, November 29, 2013 – Raymond Chabot Grant Thornton ordered an exclusive CROP survey conducted between October 11 and 25, 2013, which confirms the serious concerns that entrepreneurs have regarding the dire consequences on the economy of the shortage of the business succession. Entrepreneurs are sounding the alarm, as 94% consider that the lack of successors within SMEs will be a major detriment to Quebec’s economic growth.
The survey is innovative in that it establishes a correlation between the enterprise transfer challenge and its direct impact on Quebec’s economic and social development.
“In a context where entrepreneurship remains our economy’s key development lever, we have every reason to be worried. For more than 65 years, our Firm has been at the heart of local dynamic business growth, and we are concerned about succession and business transfer issues. This is why we have given a voice to Quebec entrepreneurs in order to better grasp the extent of their concerns in this area. The challenge is complex and requires everyone’s collaboration in such a way as to promote the sustainability of our businesses. This is why we are calling for mobilization,” said President and CEO, Emilio B. Imbriglio.
The future of SMEs in Quebec’s various regions
The survey also revealed that 90% of entrepreneurs estimate that the shortage of successors will entail negative consequences on the vitality of the economy and employment across Quebec. In Quebec, where 90% of the economic fabric consists of SMEs generating more than 50% of the GDP and close to 60% of jobs, ensuring the effective succession of business managers is no longer a choice but a priority for our economy’s growth.
“The retirement of baby-boomers will put much pressure on entrepreneurship. If, because of the shortage of successors several businesses shut down in the short term, the vitality of Quebec’s cities and villages will decline, and the quality of life of their citizens will be affected,” added Éric Dufour, Partner and National business transfer leader.
Additionally, the survey confirms the trend observed by the Fondation de l’entrepreneurship, where 30% of business owners are considering retiring within the next 10 years, and half of them are expecting to close down permanently without seeking to sell their business or transfer it to the next generation. The fear of these businesses disappearing is real. For people thinking of going into business, buying a business is much less attractive than creating one of their own.
If the trend continues, current owners will have no other choice but to shut down or sell to strangers. To prevent relocation and ensure that thriving local businesses remain controlled by Quebeckers, Raymond Chabot Grant Thornton believes that certain tax laws must be amended so that the capital gain is no longer considered as a dividend when a business is transferred to family members.
This survey is an opportunity to once again inform governments of the importance of taking action to re-establish fairness in our tax system. Unfortunately, it is more beneficial in tax terms to sell a business to a stranger than to a business owned by one’s own children. Current provisions can make the seller miss out on the $750,000 capital gain deduction ($800,000 as of 2014).
Mobilization towards a strong and prosperous Quebec
Everyone has a role to play in encouraging business succession. It is not only a government issue. The survey revealed that 37% of SME owners and managers believe that they have a responsibility along with the government to ensure Quebec’s economic growth and competitiveness.
When entrepreneurs are surveyed, they mentioned they would prefer having a professional to coach them on their transfer and would appreciate government support. In this respect, 55% of respondents have the impression that the succession is not a priority for the Quebec government, and 82% are unaware of the actions taken by the government with respect to business transfers in the last two years.
“This is why Raymond Chabot Grant Thornton is calling for mobilization to ensure the sustainability of our businesses. We need to better equip and inform our entrepreneurs to facilitate and encourage business transfers. To take on this collective challenge, we are proud to have used our expertise to develop a unique integrated approach using several specialists that takes into consideration all transfer-related issues, be they tax, strategy, human or financial. We believe that by working with entrepreneurs to avoid business closures we will be contributing to growing our economy’s competitiveness and innovation”, concluded Mr. Dufour.
The complete survey results can be found here: rcgt.com/transfert-entreprise. Business succession experts are also available for interviews.
About Raymond Chabot Grant Thornton
Founded in 1948, Raymond Chabot Grant Thornton has become a leader in the fields of assurance, tax, consulting services, and business recovery & reorganization. Its strength is based on a team of over 2,400 people, including some 230 partners in more than 100 offices in Quebec, eastern Ontario and New Brunswick. For over 30 years, Raymond Chabot Grant Thornton has been a member of Grant Thornton International Ltd, providing clients with the expertise of the member and correspondent firms in more than 100 countries.