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INORMATION TECHNOLOGY AS INHERITANCE

Posted on February 11, 2005

      Joanne Duchastel, the 60-year-old founder, owner and president of JED New Media in Montreal, isn't quite certain she'll call it a career in the next few years. And since she's her own boss, no one can force her into retirement.

      If an imminent departure were on the horizon, though, she said the firm wouldn't miss a beat on the spending front, because having the right tools is vital.

      Heading a team of six full-time employees and a few subcontractors, Duchastel said her company, which designs and develops e-learning tutorials, must have the right technology in order to remain competitive in its market space. Besides, she added, the company's succession plan all but guarantees the seamless transfer of power from mother to daughter.

      "We've always spent a lot on IT," said Duchastel. "Because we're an e-commerce and e-learning company, our whole competitive base is staying up with technology. I wouldn't say my retiring would make any difference. I have a succession plan. My daughter has been working with me for three years. If the day comes where she wants to take the reigns increasingly, she's welcome to."

      A recent CIBC report says that more than 500,000, or one-fifth, of small business owners in Canada plan to retire within the next five years, and another 30 per cent expect to retire by 2020. What this means, according to the "Are Canadian Entrepreneurs Ready for Retirement?" study, is that more than half of the nation's current small business owners expect to retire within 15 years.

      By the end of the decade, moreover, about $1.2 trillion in business assets are poised to change hands, necessitating efforts to avoid the potential for productivity drops, job loses and bankruptcy.

      One problem addressed in the report is that most Canadian small business owners haven't created succession plans, said Rob Paterson, senior vice-president of small business banking at CIBC, and the possible turmoil stemming from ill-planned changes at the top of these small companies could negatively impact spending and other initiatives.

      "When looking at it broadly, we found out only two in five had a succession plan in place or were about to get a plan in place," said Paterson, speaking from the perspective of small businesses overall. "Looking at IT businesses, you see that the owner tends to have the core technical knowledge. It's difficult to find someone who can come in and take over the business. Sometimes you see them selling to their employees."

      Sean Creaghan, vice-president of business development at Project Management Practice , a Canadian branch office based in Montreal, said the technology consulting firm has discussed possible options should either or both of the principal owners - both in their mid-40s - leave.

      Creaghan, whose business has eight full-time employees and some contract workers, said he can understand how spending on things such as technology could increase if small business owners of the Baby Boom era are replaced by a younger persons who live and breathe technology.

      "We just implemented some Microsoft technology," he said. "As business owners retire and the new generation takes over, they're not going to deal with mundane practices if there's a technology solution out there. It's so easy to get ROI on the new tools available."

      Microsoft, too, has noticed that the younger generation of business owners is often more willing than the older generation is to spend on technology. When there is an influx of young blood, there is an excellent opportunity to update IT infrastructure, said Cheri Chevalier, group manager, small business marketing for the Small and Midmarket Solutions & Partner Group at Microsoft Canada in Mississauga, Ont.

      "We're anticipating an increase on the IT focus at some of these companies," said Chevalier, adding that Microsoft Office Small Business Edition, Microsoft Windows Small Business Server and a specialized portal reveal the importance of the small business segment to Microsoft. "We've seen an increase in IT spending overall."

      Microsoft isn't the only company hoping to capitalize as small business owners start retiring. For companies like Coventry Connections, a holding firm in Ottawa that operates a number of taxi fleets and provides technology for the taxi industry, the projected exodus could present some opportunities.

      "The new CIBC report is quite startling," said Hanif Patni president and CEO of Coventry Connections. His firm has seven taxi fleets, 2,000 drivers, 125 administrative staff and 850 cabs. "In the taxi industry, there are huge investments that are being required in safety systems and security systems. Many of these players that own taxi companies in towns and cities in Ontario are now wanting to retire and do not want to reinvest."

      But as some of these owners start looking for exit strategies, Coventry Connections can do a number of things for them, said Patni. For owners who want to stick around for a while, his company can deploy the technology necessary to meeting corporate governance requirements, he said, and owners who want to retire can sell their fleets to his company.

      "For us it's an opportunity," said Patni. "And for business owners who have (developed) their businesses over time, it gives them a viable exit strategy."

      According to Michelle Warren, IT industry analyst at Evans Research in Toronto, mass retirements within the next five years could certainly have positive implications for technology providers servicing small businesses across the board.

      "People graduating today are more technologically advanced than 40-, 50- or 60-year-olds were back then," said Warren. "It can bode well for technology providers because (the new business owners) will have been using technology since they were old enough to type."

      Meanwhile, Duchastel from JED New Media, argued that many small business owners, rather than outright retiring over the next five years or so, will instead be slowing down.

      "The big question is, 'What is retirement?'" she said. "To me (owning) a small business is like owning a farm. I mean, when does a farmer not milk his cows?"

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