I had a tour of a town in the oil patch in Alberta this week. The local tour guide pointed out a lot of small businesses that had similar attributes:
- Started 20 to 30 years ago by one guy and one piece of equipment and now it has 20 to 25 employees, a fleet of trucks, or trailers, or drilling equipment, or other tools of the trade to be of service to the oil patch.
- Business is good but the business is still dependent on the founder owner and there is no succession plan in place.
- The founder owner might have thought about the future plans but isn’t sure how to make a plan if he or she wanted to.
I had a call in the spring from two guys looking to purchase a business in the Los Angeles area. They looked at 100 businesses for sale and consistently found that these businesses were too dependent on the owner and not well positioned for sale. If a business broker as involved, they were not impressed in their ability to make the business sale ready.
Although one person was in Alberta, Canada and the others were in Los Angeles California, they both were thinking the problem was a local issue – It’s not.
There is a common theme across North America of baby boomer small business founder-owners who will have a business transition in their near future.
Only about a quarter of them have a plan. What about the rest? If these business owners are too busy working and avoiding thinking about their eventual demise, who can help them?
I would think they all have bankers, lawyers, accountants, insurance agents and wealth management advisors; wouldn’t these folks have a responsibility to help put together a succession plan?
Or is the government’s job to make sure these small businesses succeed past the current owners so the jobs of the employees are preserved?
How can we be proactive with respect to this growing challenge?
If nothing happens, there will be an oversupply of businesses for sale but aren’t sale ready or there will be more work for auction companies to sell off the equipment when they close.
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