BMO Financial Group

BMO Financial Group
BMO Bank of Montreal

BMO Bank of Montreal

October 25, 2010 06:00 ET

BMO Study: More Canadian Businesses Preparing for the Unexpected, But Not the Inevitable

- Despite Economic Downturn Over the Past Two Years, There has Been Virtually no Change in the Percentage of Businesses Claiming to have a Succession Plan in Place

- However, More Canadian Entrepreneurs have Put a Health-Related(1) Contingency Plan in Place Following the 2008 Recession

TORONTO, ONTARIO--(Marketwire - Oct. 25, 2010) - A new survey from BMO Bank of Montreal released today reveals that despite the 2008 economic downturn, more Canadian business owners have taken the steps necessary to prepare for unexpected disasters. Yet, when it comes to implementing an exit strategy for their business, even the global recession has not spurred change.

The survey, conducted by Harris/Decima for BMO, revealed:

  • 85 per cent of small business(2) owners in Canada do not have a succession plan in place – virtually unchanged since 2008
  • 26 per cent of Canadian business owners have developed a health-related contingency plan stemming from the H1N1 virus scare – up 10 per cent since 2008

"While events such as H1N1 and environmental disasters have enticed business owners to put contingency plans in place and help prepare for the unexpected, the vast majority have not planned for the succession of their business," says James Wong, Vice President of Succession Planning, BMO Harris Private Banking. 

When asked what prevented small business owners from doing succession planning, close to half (47 per cent) stated that their number one reason was that it was too early to start think about it; meanwhile, 20 per cent indicated that uncertainty about future business conditions prevented them.

"As our economy begins to emerge from the recent downturn, business owners are looking for new opportunities to position themselves for growth," said Cathy Pin, Vice President, Commercial Banking, BMO Bank of Montreal. "They want clear advice and practical solutions including how to improve productivity, upgrade infrastructure, and retool their business processes. They are also looking longer-term to get a better perspective on the value of their business and what plans they need to develop for the future. For some, they are just beginning to consider what a desired succession plan would look like for them," added Ms. Pin.

The survey also revealed significant differences between small and larger(3) Canadian businesses including:

  • 53 per cent of small business owners (40 per cent of larger businesses) describe the Canadian economy as being in a recession
  • Small business owners in Canada are roughly three times less likely to know if the value of their business has changed since the onset of the recession (13 per cent vs. 5 per cent larger businesses)
  • 73 per cent of small businesses do not have a plan in place to keep things running if senior managers were lost (versus 40 per cent larger businesses)

"These significant differences between small and large businesses are not totally unexpected, and are likely the result of the limited time and resources small business owners have to dedicate to planning," continued Mr. Wong. "Yet, with anywhere from one half to two-thirds of these small business owners planning to retire and exit their businesses in the next 10 years, it is important that they make the time to work with their financial advisor and get their succession house in order."

The online survey was conducted by Harris/Decima among 650 Canadian business owners (400 small, 250 larger) and 650 US business owners (400 small, 250 larger). Data were collected between September 22nd-October 10th, 2010. Results were weighted using employee size within region.

(1) For the purpose of this release, "health-related" refers to a plan that was put in place stemming from the H1N1 virus scare.

(2) For the purpose of this release, a small business is one with 1-49 employees.

(3) For the purpose of this release, a larger business is one with 50+ employees.

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