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(Image courtesy of MNP LLP)
With a wave of baby boomer business owners nearing retirement, Canada is on the brink of a generational shift that could reshape its economic landscape, warns MNP LLP in its Succession Readiness Report. The report reveals that the majority of retiring business owners are postponing or underestimating the importance of succession planning — something many may struggle to prioritize amid the day-to-day demands of running their companies, says MNP’s Family Office Services division.
According to the survey, nearly two-thirds have considered their exit objectives but have yet to formalize a plan, while one in five have not even started thinking about one. Fewer than one in 10 have established clear, actionable goals for the changeover which threatens to leave a significant gap in Canada’s business ecosystem.
Canadians aged 50 and older accounted for 37.5 per cent of the population in 2024, a share projected to climb to between 38.6 per cent and 49.4 per cent by 2065. These aging entrepreneurs—who currently are the primary decision makers of 62 per cent of Canada’s small and medium-sized businesses—face pivotal decisions about whether to sell, close or transition their enterprises to successors.
With nearly two-thirds (63.8 per cent) of Canada’s private sector workforce depending on these business owners to navigate succession planning effectively, MNP says the stakes are enormous, holding potential outcomes that will ripple through employees, communities and local economies.
“We are witnessing one of the most significant wealth transitions in history as Canada’s workforce ages and more small business owners approach retirement. At the same time, economic uncertainty continues to rise for businesses across the country,” stated Kerry Smith, national leader of family office services at MNP LLP. “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.”
A backbone of Canada’s economy, small and medium-sized businesses employ nearly 7.8 million people in the private sector. The significant exit planning gap increases the potential for business closures, jeopardizing jobs and community stability. Recent data from Statistics Canada found that the business closure rate edged up to 4.8 per cent in October 2024, surpassing the historical average of 4.6 per cent.
Smith emphasizes that while many business owners understand the importance of planning, far too few have taken the critical step of putting pen to paper.
“A clear, actionable succession plan isn’t just a best practice—it’s critical,” he says. “For owners, it secures their financial future. For employees, it provides stability and confidence in their jobs. Without a written plan, transitions become far more uncertain, putting the survival of the business and the livelihoods of its workforce at risk.”
Succession planning is often overlooked by owners, who may delay critical decisions while waiting for ideal market conditions—or until unexpected health emergencies force them to take action.
“In a lot of cases, owners have some key staff members who are vital to the business operations. Having a plan in place ensures the integrity of the business can be maintained in case of an emergency,” explained Smith.
Early planning also offers owners the flexibility to define a role that suits them, both before and after the transition. While retaining key staff is integral to a successful exit plan, only about two in five of the Canadian business owners surveyed have thought about which employees are vital to the business through a transition. Nearly a quarter haven’t considered employee retention at all.
One way to transition ownership while maintaining business continuity is through employee share ownership plans (ESOPs) and employee profit sharing plans (EPSPs). ESOPs provide a structured way for business owners to pass their business on to their workforce and allow employees to build wealth through the company. EPSPs, meanwhile, offer a strategy for enhancing employee engagement and retention by sharing company profits, giving employees a direct stake in the company’s financial success and fostering a sense of shared ownership and commitment to growth.
“ESOPs and EPSPs remain underutilized tools. As baby boomers contend with challenges like health issues, burnout and workforce retention, there has never been an [more] opportune time for business owners to create pathways for employees to build wealth through ownership and profit sharing,” said Smith. “Holistically, tools like these, as part of a succession plan, can provide a way to help transition ownership while preserving jobs, and sustaining the long-term success of businesses.”
According to the MNP report, less than half of Canadian business owners surveyed feel somewhat confident that their business’s net value will align with their goals and admit they have not sought professional advice to confirm this.
“Seeking guidance from a qualified advisory team can make the difference both in terms of maximizing the value of the business while minimizing your tax burden,” advised Smith. “At the same time, a succession plan works to mitigate risks and manage the complex process —whether you plan to transfer leadership, sell your business to a third party, or pass ownership to a member of your family.”
With succession being a high priority topic that often gets set aside, Annex Business Media, parent company of On-Site Magazine, is looking to help Canadian SME owners and executives take steps to navigate their paths forward, hosting SUCCESSion 2025. Scheduled for May 21 at the Universal Event Space in Vaughan, Ont., SUCCESSion will be a one-day, conference-style event tailored for owners and executives early in the process of successfully transitioning their businesses. Full details are available on the event’s website.