Scotiabank Survey Highlights Succession Challenges for Small Businesses

Scotiabank's 2024 Path to Impact Survey reveals digitalization as a critical success factor in unlocking future growth and successful small business transitions.

TORONTO, Oct. 9, 2024 /CNW/ - As a significant wave of small business owners get set to transition into retirement, a recent study from Scotiabank shows small business owners feel modernizing their digital capabilities is a key opportunity to both increase the value of their business in advance of a potential sale.

In Scotiabank's fifth annual Path to Impact Survey, several small business owners across Canada said that they do not have a clear path to digitalizing their operations which, in addition to dissuading potential buyers and possibly leaving money on the table may also make the business less productive and less profitable.

"The landscape of Canadian business is transforming," explains Pouya Zangeneh, SVP of Small Business Banking, Scotiabank. "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. Scotiabank is committed to supporting these transitions, offering tailored solutions and expert guidance to ensure our clients are equipped to thrive in this new era of business."

Other findings from Scotiabank's 2024 Path to Impact Survey include: nearly one-third (31%) of small business owners in Canada are planning to sell their business by 2030. However, many aren't making the necessary plans – just over six in ten (65%) of small business owners have a succession plan in place, and of those who plan to sell in six or more years, about four in ten (43%) admit they have not prepared.

Meeting short-term challenges while still meaningfully planning for the future, including a transition in ownership, takes a concerted effort that small business owners may not have the time or resources for – the top reasons small business owners gave for not having a plan in place were that it was not a priority (40%), they do not need one (33%), or admitted that they had never considered the need (33%).

Like a lack of planning, lagging digitalization of small businesses can put a successful transition of ownership at risk. Though nearly half (45%) of small business owners believe that modernizing their business through digital transformation is essential to help with its sale or transition, nearly the same number (46%) say they don't have a digital transformation plan in place.

Even without a fulsome digital transformation plan, Scotiabank's annual survey revealed that small business owners do see the value in modernizing aspects of their business – nearly three quarters (71%) say they have enhanced some digital capabilities in the past three years, through upgraded software (36%), hardware (35%) and security (25%). Among the businesses who made upgrades, owners reported that their digitalization efforts resulted in higher revenues (33%), providing better service (37%), and reaching more customers (37%). Beyond these benefits, digital tools can make businesses more attractive to buyers, streamline valuations, and ease the handover process.

Scotiabank's Path to Impact survey also found:

• Just over one-third (36%) of small business owners plan to transfer ownership within their family, with a smaller proportion planning to close the business altogether (15%), and an equal percentage of small business owners share that do not have any plans (15%).
• Close to half of small business owners consider their desired retirement lifestyle (46%), income tax implications (46%), and the impact of the sale on their retirement plan (43%) when making the decision to sell or transition their business.
• Canadian small businesses remain optimistic about their future (58%) despite the challenging economic climate.

As small business owners balance changes to their business and succession planning with day-to-day operations, Scotiabank can offer a variety of tips to help businesses navigate the path forward:

1. Leverage Digital Tools for Comprehensive Business Planning

Utilize Scotiabank's Small Business Planning Tool to navigate through the initial stages of drafting a comprehensive business plan. This tool is designed with helpful tips and essential definitions to streamline the planning process.

Scotiabank can also offer support on several grant and subsidy options through programs like the Scotiabank Women Initiative and the Black Entrepreneurship Fund. These programs aim to remove barriers and provide entrepreneurs from underrepresented groups with access to capital.

2. Plan for the Future with Wealth Management and Succession Planning

Engage with a Scotiabank Small Business Advisor who can refer you to Scotiabank's Wealth Management services for business transition planning support. This partnership is crucial for businesses looking to plan their succession or explore sale options. Ensuring a smooth transition involves strategic planning and expert financial advice, safeguarding the future of your business and maintaining its legacy.

3. Adopt Advanced Digital and Merchant Services

Embrace digital transformation by integrating services like ScotiaConnect ® and partnerships with Chase Payment SolutionsSM for Merchant Services. These platforms offer comprehensive payment processing solutions and advanced online reporting to help manage transactions and streamline operations. The shift towards online commerce is accelerated with competitive rates, enhanced security, and the convenience of managing business finances anytime, anywhere.

4. Consult with a Dedicated Small Business Advisor

A Scotiabank Small Business Advisor can provide specialized advice tailored to your business's unique needs. These advisors are equipped to help you manage cash flows, understand loan repayment strategies, and leverage various financial tools. Their expertise can be invaluable in securing your business's financial health and navigating complex financial landscapes.

To read the full report, click here.

Methodology:

The Scotiabank Small Business Path to Impact Survey was conducted on behalf of Scotiabank by Maru Public Opinion and its sample and data collection experts at Maru/Blue. A total of 663 financial decision makers at Canadian businesses with annual revenue between $50,000 and $5 million responded to the survey between July 12 and 22, 2024. The survey was conducted in both English and French.

About Scotiabank:

Scotiabank's vision is to be our clients' most trusted financial partner, to deliver sustainable, profitable growth and maximize total shareholder return. Guided by our purpose: "for every future," we help our clients, their families and their communities achieve success through a broad range of advice, products and services, including personal and commercial banking, wealth management and private banking, corporate and investment banking, and capital markets. With assets of approximately $1.4 trillion (as at July 31, 2024), Scotiabank trades on the Toronto Stock Exchange (TSX: BNS) and New York Stock Exchange (NYSE: BNS). For more information, please visit http://www.scotiabank.com and follow us on X @Scotiabank.

Disclaimer:

Information contained herein is subject to change and is provided for information purposes only and should not be relied upon as financial, tax or investment advice or guarantees about the future, nor should it be considered a recommendation to buy or sell.

SOURCE Scotiabank