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 per cent) of these business owners plan to work until they are in their seventies, with 14 per cent saying they will never retire. Another 27 per cent say they will exit between ages 65 and 69.
According to the new research, more than half (53 per cent) 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 per cent 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 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 per cent 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.”
If the price is right…
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 per cent) say their family members are not interested in taking on their business, and, according to survey respondents, the highest bidder (24 per cent) would be the first choice of a potential buyer. Family (18 per cent) and business partners (17 per cent) are less favoured suitors.
Cashing in doesn’t mean cashing out
Small business owners do not appear to be relying solely on the sale of their business to fund their retirement. RRSPs (56 per cent) and investments (54 per cent) are expected to be the most important sources of retirement income, while the proceeds from a business sale are viewed as important by 41 per cent.
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 per cent of small business owners while 31 per cent thought a financial advisor would also make a positive contribution.
Breaking up is hard to do
Letting go won’t be easy in the transition process for many business owner/operators.The survey findings reveal that 60 per cent still want to be involved in their company after they retire, either as a financial advisor/mentor (30 per cent), a consultant (22 per cent) or as a member of the company’s board of directors (seven per cent).
About the Survey Methodology
This survey was conducted online from September 21-October 14, 2012, 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.
About Investors Group
Investors Group, founded in 1926, is a national leader in delivering personalized financial solutions to Canadians through a network of more than 4,500 Consultants located throughout Canada. In addition to an exclusive family of mutual funds and other investment vehicles, Investors Group offers a wide range of insurance, securities, mortgage and other financial services. Investors Group is a member of the IGM Financial Inc. (TSX: IGM) group of companies. IGM Financial is one of Canada’s premier financial services companies with approximately $120 billion as of September 30, 2012, in total assets under management.