As retirement nears, many small business owners lack plans for digital transformation and succession
A recent study from Scotiabank highlights that small business owners see modernizing their digital capabilities as essential to increasing the value of their business before a potential sale.
According to Scotiabank's 2024 Path to Impact Survey, many small business owners feel unprepared for digitalization, which could dissuade buyers and affect productivity and profitability.
The survey found that nearly one-third of small business owners in Canada plan to sell by 2030. However, over six in ten have no succession plan, and among those planning to sell in six or more years, 43 percent admit they have not prepared.
The primary reasons given for not having a plan are that it is not a priority (40 percent), they do not need one (33 percent) or have never considered the need (33 percent).
“With a significant portion of small business owners nearing retirement, and digital savvy younger entrepreneurs stepping up, the need for robust digital strategies and effective succession planning is escalating,” said Pouya Zangeneh, SVP of Small Business Banking at Scotiabank.
Scotiabank aims to support these transitions by offering tailored solutions and expert guidance.
Though 45 percent of small business owners believe digital transformation is essential for a sale or transition, 46 percent do not have a plan in place. Nonetheless, 71 percent have improved their digital capabilities in the past three years by upgrading software, hardware, or security.
Businesses that have made upgrades reported higher revenues (33 percent), better service (37 percent), and more customers (37 percent). Digital tools also help businesses attract buyers, ease valuations, and simplify the transition process.
The survey also revealed that 36 percent of small business owners plan to transfer ownership within their family, 15 percent plan to close the business, and another 15 percent have no plans for the future.
Retirement lifestyle, income tax implications, and the impact of a sale on retirement plans are key considerations for nearly half of the business owners surveyed.
Despite current economic challenges, Canadian small businesses remain optimistic about the future, with 58 percent expressing a positive outlook.
Scotiabank's Tips for Small Business Owners:
- Leverage Digital Tools for Comprehensive Business Planning
Scotiabank’s Small Business Planning Tool offers guidance for drafting a business plan, including tips and essential definitions to streamline the process.
Support is also available through programs like the Scotiabank Women Initiative and the Black Entrepreneurship Fund, designed to provide entrepreneurs with access to capital.
- Plan for the Future with Wealth Management and Succession Planning
Engage with a Scotiabank Small Business Advisor to access Wealth Management services for business transition planning. This partnership helps ensure a smooth transition, strategic planning, and expert financial advice to safeguard a business's future.
- Adopt Advanced Digital and Merchant Services
Businesses are encouraged to integrate digital transformation services, such as ScotiaConnect and partnerships with Chase Payment SolutionsSM for Merchant Services.
These platforms offer payment processing solutions and advanced online reporting to streamline operations and manage finances.
- Consult with a Dedicated Small Business Advisor
Scotiabank Small Business Advisors provide tailored advice on cash flows, loan repayment strategies, and financial tools to ensure a business's financial health. Their expertise helps businesses navigate complex financial landscapes.
