Entrepreneurs love to work and retirement is a distant concept for many of them according to a new Investors Group survey of Canadian owners of small and medium sized businesses.
More than a third (39%) of these business owners plan to work until they are in their 70s, with 14% saying they will never retire. Another 27% say they will exit between ages 65 and 69.
According to the new research, more than half (53%) of Canada’s small business owners/operators don’t have a succession plan in place, but a majority say it’s because they are not ready to retire, including 69% who are boomers (44 – 64 years).
“Unfortunately leaving succession planning until retirement leaves little time to deal with what can be a complicated process,” says Jack Courtney, vice president, high net worth planning at Winnipeg-based Investors Group. “While there can be great variation in their circumstances, they are all likely to need advice on tax strategies, investments and family wealth planning to maximize the fruits of their labour.”
Of those who are planning ahead for a smooth transition, only 14% of small business owners/operators have a written succession plan.
“If you’ve built a thriving business, and want it to maximize your return in retirement, you’ve got to plan years in advance, particularly if there is a planned transition to the next of family,” says Courtney. “It’s never too early for business owners to consider options for their future and to start asking questions about how to transition their business. There are many factors to consider in putting together a good exit strategy.”
When it comes to making decisions about transitioning their business to new ownership, cold cash overrides blood ties for small business owners. An overwhelming majority (85%) say their family members are not interested in taking on their business, and, according to survey respondents, the highest bidder (24%) would be the first choice of a potential buyer. Family (18%) and business partners (17%) are less favoured suitors.
Small business owners do not appear to be relying solely on the sale of their business to fund their retirement. RRSPs (56%) and investments (54%) are expected to be the most important sources of retirement income, while the proceeds from a business sale are viewed as important by 41%.
The task of developing and implementing a business succession plan is seen as more than a one-person job. An accountant is viewed as a required part of succession planning by 57% of small business owners while 31% thought a financial advisor would also make a positive contribution.
Letting go won’t be easy in the transition process for many business owner/operators.The survey findings reveal that 60% still want to be involved in their company after they retire, either as a financial advisor/mentor (30%), a consultant (22%) or as a member of the company’s board of directors (seven per cent).
The survey was conducted online from September 21-October 14, with owners or senior financial decision makers of businesses with less than 500 employees. The data was weighted by business size within region to match the profile of businesses of this size in Canada.