Why Business Succession Planning Matters
A Conversation with CF Business Advisor, Jordan Pomrenke
Jordan Pomrenke has been with Community Futures Entre-Corp in Medicine Hat for over three years, and currently serves as a Business Advisor helping rural Alberta business owners navigate growth, challenges, and transitions. We sat down with Jordan to discuss why business succession planning is so critical for rural communities and what business owners should know before they start the process.
What types of businesses does Community Futures typically work with?
We deal with clients all the way from local restaurant owners to every type of trade industry, to people coming in with different inventions that they've thought up. A typical client can be anywhere from someone who has a business idea and doesn't know where to start, all the way to someone who's owned a business for over 20 years and they're looking at how to grow and scale it.
When business owners come to you thinking about selling, what's usually their first question?
One of their first main things is: how do I come up with a number to sell my business for? Where do I even begin? We're not trained at valuing a business, and in our region, there's not even many accountants who have specific training in that area. Without spending thousands of dollars for consultations, there's no one who necessarily has that expertise. That's where Exit Navigator is such a valuable resource, it's really nice to have that available from a business advisor perspective.
What makes valuing owner-operated businesses particularly challenging?
A lot of the owners that come in—they're the ones who are the business. They're the ones meeting with clients, doing service calls, whether it's retail or whatever it is. It's hard to put a value on it when they're the ones driving so much of the business. Some of them might not have very many assets. So if you don't transfer those relationships over to the buyer, how much is the business actually worth? It's more than just valuing it—it's also about having a succession plan and a transition plan to make sure the business is successful even after you exit.
Why is business succession planning so important for Alberta communities right now?
We're seeing—whether it's in Medicine Hat or smaller surrounding communities—there's been long-time businesses that play such an integral part of the community. As these people begin to look at retirement and what their options are, they might be the only plumber in a town. They might be the only mechanic in a town. To lose that business, it's not just a business—it's a key part of what supports the community.
Without having succession plans and transition plans in place for those businesses, it has a massive impact on the local community. If you can't just phone Bob's Plumbing at all hours of the night and you have to wait for someone from Medicine Hat, it makes it a barrier to living in some of those small communities.
Can you talk more about that community impact?
From an economic development standpoint, we're desperately in need of people in the region. Not everyone can live in Medicine Hat, so we need all the surrounding communities as well if we need to keep our young people. If there's no opportunities locally, they're going to go to the larger centers.
The snowball effect is very real. You lose one business, and then a few less people move to the community or they move away, and that leads to another one closing. It's just a vicious cycle, and it's so hard for that size of community to try to stop that and turn it around.
By having succession plans available, it could be an opportunity for young people to own a business and do meaningful work in their communities. The owner sees how important their business is and they want to leave a legacy. It's more than just transitioning a business—they want to see that all the work they've put into this community continues. In a way, it's a bit like it's their baby and they're giving it to someone else.
What are some unique challenges you see in rural business transitions?
One challenge we see often is with local restaurants, especially in small towns where there's usually only a handful of them. The business model works because the owner owns the building and can run with certain profit margins. But when someone comes in and starts running the business and now they have a lease payment as well, all of a sudden is the business still profitable? There are so many business models that work because you're not doing an extra lease payment on top.
Another challenge is that business owners are often too busy to plan ahead, right?
Absolutely. Business owners are so busy working in their business, they don't have time to work on their business. And when you add in something like succession planning, that's just so far from their mind. Even if it is something that they see in the next five years, there's just so much going on with the running of the business that it just gets pushed back. And if that's your main source of income, you don't have time to take directly off your bottom line for planning.
What would you say to someone who is just starting to think about selling their business?
First, this isn't something they have to navigate by themselves. There's support like Community Futures and Exit Navigator, but also talk with your accountant, talk with your lawyer, talk with people in the community who've gone through this process already. There's so much knowledge and support out there of people ready and willing to help you.
And while your business is so much tied to your legacy and you have that personal connection, think through the alternative. Do you want it just to close down, or do you want to see it passed on and thriving with the next person? If you can help set that next person up for success for another decade or decades, that's such a huge win for you, for the business, and for the community. While it's difficult, it's definitely worth the time and effort to seek out the help and support that you need.
Ready to start thinking about your business transition? Community Futures and Exit Navigator are here to help. Contact your local Community Futures office or visit ExitNavigator.ca to learn more about free resources available to rural Alberta business owners.
