Legacy vs. Liquidity
The Business Succession Crisis No One Is Talking About
Across Canada, thousands of business owners are facing a reckoning. The entrepreneurs who built the economic backbone of the country are retiring or passing away, leaving behind an unprecedented problem: who takes over?
Over $2 trillion in business assets will change hands in the next decade. More than 60% of small and mid-sized businesses are owned by individuals over the age of fifty-five, and many of these companies have been built over decades, representing not just wealth, but legacies—jobs, reputations, and economic stability.
Most of these businesses will not survive the transition.
The numbers are clear. Only 30% of family businesses make it to the second generation. Fewer than 12% make it to the third. The majority will be sold, liquidated, or simply shut down. The consequences of this shift will not be limited to the families involved. Entire industries will be reshaped. Communities will lose locally owned enterprises. Private equity firms and multinational corporations will absorb the remains.
The real challenge is simple, but devastating: many heirs do not want these businesses. They have built their own careers, pursued different fields, or are simply uninterested in carrying the weight of ownership. For them, the easier choice is liquidation—selling the company for a lump sum and walking away.
This is the moment of crisis. The choice between legacy and liquidity will define not just family wealth, but the structure of the economy for decades to come.
Why Heirs Are Walking Away
For decades, the traditional model of business succession was straightforward. A founder built a company, passed it down to their children, and the next generation took over. That system has broken down.
The reasons are complex, but they follow a clear pattern.
First, many heirs have chosen different career paths. The children of entrepreneurs are more likely to have pursued professional careers in law, finance, or technology. The idea of stepping into a manufacturing business, a retail operation, or a construction company is not just unappealing—it's completely outside of their expertise.
Second, the work itself is a deterrent. Many baby boomers who started businesses worked long hours for decades, often sacrificing personal time to build something sustainable. Their children have seen that sacrifice firsthand and want no part of it. Running a business is not just about ownership—it comes with stress, financial risk, and responsibility for employees. Many would rather take a lump-sum payout and invest it elsewhere.
Finally, many heirs are simply unprepared to run a company. Even if they wanted to take over, they lack the skills, mentorship, or training to step into leadership. Business succession is not just about passing down an asset—it requires an intentional, structured transition, something that most owners never plan for.
As a result, the default option for many inheritors is to sell. And when businesses are sold in haste, they are rarely sold at their full value.
The Liquidity Trap: Selling Too Soon, Too Cheaply
Selling a business is not the problem. Selling it without strategy is.
The moment an inheritor decides to sell, they enter a marketplace where buyers have far more experience. Private equity firms, competitors, and institutional investors look for businesses that are undervalued, mismanaged, or sold in desperation. These companies are not looking to continue a legacy—they are looking for opportunities to extract value.
When a company is sold without proper valuation, negotiation, or transition planning, it's often sold far below its worth. This is particularly true when an owner’s passing forces a sale. Grieving families rarely take the time to optimize a deal, and professional buyers know this.
The impact of this liquidity trap is massive.
First, businesses are often acquired for their assets, not their operations. Private equity firms break them apart, liquidate valuable holdings, and cut jobs to maximize short-term profitability. What was once a thriving business becomes nothing more than an entry on a balance sheet.
Second, corporate consolidation removes local control. When a national or international competitor buys out a small business, decision-making shifts away from the community. Operations are streamlined, costs are cut, and the human element of ownership disappears.
Finally, communities lose wealth. A locally owned business recirculates revenue within the local economy. Employees are more likely to be retained, supplier relationships are more personal, and customer loyalty is higher. When those businesses are replaced by corporations, profits leave the community, moving up the chain to investors rather than staying in local circulation.
Selling is not inherently bad. But selling without intention can be devastating.
The Smart Way to Sell: Structuring a Legacy Sale
There is a way to transition out of a business without destroying its value. The difference lies in whether the sale is structured for long-term sustainability or short-term gain.
A fire sale is the worst possible outcome. This happens when an owner dies or retires suddenly, leaving heirs scrambling to sell as quickly as possible. Without preparation, these businesses are sold below value, leading to job losses, disorganized leadership transitions, and financial loss.
A structured legacy sale preserves the integrity of the business while allowing the owner or heirs to exit strategically. There are several ways to do this:
- Employee buyouts: Selling the business to key employees ensures that it remains in capable hands while preserving jobs and local ownership.
- Gradual ownership transition: Selling shares over time, rather than all at once, allows for continuity in leadership and strategic adaptation.
- Revenue-sharing agreements: Instead of an outright sale, structuring a deal where the previous owner or heirs retain a percentage of profits can create long-term wealth while allowing professional management to take over.
- Pre-negotiated acquisitions: Identifying and building relationships with potential buyers years in advance ensures that when a sale does happen, it is done on favourable terms.
These approaches require foresight, planning, and professional guidance. But the alternative is often watching decades of work vanish overnight.
The Future of Business Ownership: Who Will Keep the Wealth?
This crisis is not just about individual businesses—it's about the long-term direction of the economy. If the majority of small and mid-sized businesses are sold off in the coming decades, Canada will shift from a nation of business owners to a nation of corporate employees and franchise operators.
Wealth that was once held in families will be transferred to corporations, institutional investors, and foreign buyers. The next generation will not just lose the businesses—they will lose the opportunity to create lasting wealth through ownership.
For families, the question is urgent: is your business an asset to be passed down, or a liability to be sold?
For heirs, the choice is clear:
- Steward the business and grow its value.
- Sell it strategically to maintain its legacy.
- Or liquidate and watch wealth disappear.
Most will sell.
A few will understand that a business is more than a transaction—it's the foundation of generational wealth.
The only question left is: who will be left standing when the transition is complete?
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The greatest transfer of business wealth in history is here.
Most businesses will change hands. Most heirs don’t want them. Most will sell. Most will lose.
When legacy meets liquidity, corporations win. Families lose. Wealth vanishes.
Who will keep control?
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