As Canada’s baby boomers head toward retirement, a major issue is surfacing in the business world: many of them don’t have a solid plan for passing the torch. Small and medium-sized businesses (SMEs) are the backbone of Canada’s economy, and a huge number of them are owned by individuals who are either at or past retirement age. But without a clear exit strategy, these businesses face serious risks: forced closures, rushed sales, or selling for much less than they’re actually worth.

A 2025 report from MNP LLP found that while nearly two-thirds (64.1%) of business owners have thought about their exit strategy, they haven’t actually formalized a plan. Even more concerning, 20.7% haven’t even started thinking about succession. A 2024 survey from the Ontario Chamber of Commerce paints a similar picture, showing that 73% of business owners in Ontario don’t have a completed succession plan.

The Owner-Operated Challenge

Many baby boomer business owners built their companies from scratch and are still deeply involved in daily operations. Because they’ve never fully handed off decision-making responsibilities, their businesses depend heavily on them. This can be a major red flag for potential buyers, who might worry about whether the company can function without its founder. Without a structured leadership transition, the business could struggle, or even fail, once the owner steps away.

The Hidden Financial Statement Problem

Most of these owners haven’t needed outside investors, so their financial strategy has been shaped by tax minimization rather than maximizing profitability. While this might have saved money in taxes over the years, it can be a big problem when it’s time to sell.

Buyers and banks look at financial statements to determine a company’s value. If the business’s books show minimal profits because of aggressive tax strategies, it can make the company seem less profitable than it actually is. This can drive down its valuation and make it harder for buyers to secure financing. In short, what worked well for reducing taxes in the short term can backfire when trying to sell the business.

The Impact on Employees and the Economy

The lack of succession planning doesn’t just affect business owners; it has major consequences for employees and local economies. As of 2022, small businesses alone employed 5.7 million Canadians, accounting for 46.8% of the private labor force. Add in medium-sized businesses, and that number jumps to 7.8 million, or nearly two-thirds (63.8%) of the private sector workforce.

If these businesses shut down due to poor succession planning, the ripple effects could be huge, job losses, economic disruptions, and uncertainty for workers. Employees might face instability, fewer opportunities for growth, or heavier workloads if leadership remains unclear. For communities that rely on family-owned businesses, widespread closures could impact suppliers, service providers, and the local economy. Plus, buyers who are looking for stable, well-run businesses may be turned off by the lack of financial transparency and leadership continuity.

What Can Be Done?

With so many baby boomer business owners nearing retirement, now is the time to take action. Here are some key steps to ensure a smooth transition and maximize business value:

1. Create a Succession Plan – Identify and train key employees who can take over leadership roles or consider hiring external management. A solid transition plan makes buyers more confident that the business can run smoothly without the owner.
2. Fix Financial Reporting – Work with financial advisors to adjust tax strategies so that the business’s financials better reflect its actual profitability. Normalizing earnings over a few years can significantly improve valuation.
3. Streamline and Modernize – Invest in technology, improve efficiencies, and optimize operations to make the business more attractive to buyers. A well-run, modern company is more likely to sell for a premium.
4. Plan Early – Don’t wait until the last minute. Business owners should start planning their exit strategy years in advance to ensure a smooth and profitable transition.

The Risk of Doing Nothing

Without a plan, business owners risk seeing their life’s work lose value, or disappear entirely. The combination of no succession strategy, unclear financials, and outdated operations can make it difficult to attract buyers or secure a good sale price.

For those who have spent decades building their businesses, ensuring a profitable and smooth transition should be a priority. The best time to start planning is now, before retirement is right around the corner and options become limited. A well-thought-out succession plan not only protects the business but also safeguards employees and supports the local economy.ing proactive financial management, working with professionals year-round, and leveraging modern accounting tools, you can turn your financial statements into a powerful asset for growth and success.