BMO Financial Group

BMO Financial Group

July 11, 2005 17:02 ET

Small Businesses Should Focus on Succession Planning

for their own sake and for the sake of the economy Attention: Business/Financial Editor, News Editor, Photo Editor SAINT JOHN, NB--(CCNMatthews - July 11, 2005) - Having a succession plan is absolutely crucial to the survival of a small business, yet fully two-thirds of small business owners have failed to address this need, according to Bill Downe, Deputy Chair, BMO Financial Group and CEO of BMO Nesbitt Burns. Speaking today before the Rotary Club of Saint John, Mr. Downe said that explains why only one in three small and medium sized enterprises (SMEs) survives the transition to a second generation, and only one in ten the transition to a third generation.

"This represents a serious concern when so much of our economy depends on SMEs," Mr. Downe said. "Between 80 per cent and 90 per cent of all companies in Canada are small to medium-size businesses. They generate nearly half of the country's GDP and are responsible for six million jobs," he said, adding that SME's employ more than half of employees in New Brunswick.

"The loss of any company, regardless of its size, has an economic and social impact on employees and communities. Jobs, expertise, experience, business networks - all are irretrievably lost when a company shuts down. Clearly, we all have an interest, directly or indirectly, in the orderly succession of these businesses," said Mr. Downe.

Pointing to last month's survey of the Canadian Federation of Independent Business that found that 7 out of 10 SME owners intend to exit their business over the next ten years, Mr. Downe urged small business owners to develop a succession plan that addresses the following questions:

• Is there someone in my family who is not only available to take over, but also qualified?
• If so, what is the best way to prepare him or her to take on this role?
• What should be done to ensure that all family members are treated fairly in the process?
• Should the family retain ownership of the company while entrusting its management to someone else?
• Would it be better just to sell the company outright?

To develop and implement an effective succession plan, it is important to isolate the key stakeholders from the process itself, i.e., the family, the shareholders, and the business. One should also seek professional outside advice, such as is provided by BMO Harris Private Banking which helps owners carefully consider the strategic options for their business.

"We recognize that succession planning is part of a larger wealth management picture, and that all the elements, like estate and trust planning, investment management, and plans for philanthropy need to be considered," said Mr. Downe.

Mr. Downe observed that BMO experts can help maximize the value of the company and increase its sale price, if selling the business is the desired outcome or, equally importantly, implement a rigorous process to designate a successor to head the business.

"Most small business owners have a huge emotional investment in their business and often worry that no one will do the job like them," he said. "It's such a difficult thing to do, but I can't say it often enough: the succession planning process must not be guided by those emotions."

"We understand succession planning isn't easy, and sometimes it's painful. But so much is at stake, both for the businesses themselves and the wider community and economy. If you are a small business owner, and you haven't started a succession plan yet, or if you need your current plan to be better, now is the time to deal with it," advised Mr. Downe.

About BMO Harris Private Banking
BMO Harris Private Banking, a member of BMO Financial Group, offers integrated
wealth management solutions to high net worth individuals and families. Modeled on the private banking business of Harris Bank, BMO Financial Group's Chicago-based U.S. subsidiary, which has been managing money for affluent clients for more than 100 years, it provides seamless North American delivery of integrated wealth management solutions.
In addition to offering succession planning services, BMO Harris Private Banking offers Investment Management, Estate and Trust Planning, Platinum Banking and philanthropic services through its 17 offices across Canada.

Established in 1817 as Bank of Montreal, BMO Financial Group (TSX, NYSE: BMO) is a highly diversified North American financial services organization. It is the second largest small business lender in Canada and one of the largest in North America. Its Canadian retail arm, BMO Bank of Montreal, operates 76 branches in Atlantic Canada, including 24 branches in New Brunswick. BMO Nesbitt Burns, one of Canada's leading full-service investment firms, operates 15 offices in Atlantic Canada.

Editors Note: A photo for this release will be available on the CP picture wire via PR Direct.
A photo and a copy of Mr. Downe's speech will be made available at

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