As a small business accounting firm, we at Silver+Goren deal with the entrepreneur crowd frequently, so we talk a lot about building a strong foundation and plan for your business.
But what’s your plan when it’s time to retire? If you have no clue … unfortunately, you’re not alone.
The numbers behind succession planning
A TD Waterhouse Business Succession Poll showed three quarters of Canadian small business owners haven’t fully prepared for the day when they will no longer be running their business. Not having a succession plan can cause major complications down the line.
According to the small business owners polled, the top two reasons for being succession plan-less were ‘still trying to figure out a plan’ (45%) and ‘just haven’t gotten around to it yet’ (31%).
Respondents were fairly divided in what they want for their business when they retire.
The top options were closing the business (23%), selling it to a third party (20%), or transferring it to a family member (18%). More than a quarter (27%) don’t know what they will do it comes time to retire. The last stat shows many business owners have not spent any time on exit strategy planning.
These stats become particularly concerning when you take them in context of small business ownership in Canada.
Right now most of the country’s 1.2 million small and medium-size enterprises are owned by Baby Boomers. It’s estimated more than forty percent of these entrepreneurs will leave their businesses within the next five years and more than 70% within the next decade.
Think about the massive transfer of wealth behind these numbers. The retirement tidal wave will have significant impact on the lives of the small business owners and their families.
For many, the value accumulated in their business is the biggest part of their life savings. Making sure this transfer is done in the most effective and profitable manner is critical to the quality of retirement for most small business owners.
Succession planning best practices
In the next few weeks, we’ll look at some of the issues for small business succession planning, and check out how they fit with your business strategic plan. Because plans aren’t just for the beginning and the middle…they need to reach the end.