Four In Ten Canadian Small Business Owners Are Uncertain About Retirement

A majority of Canadian small business owners may be close to retirement, yet many are uncertain about their post-business life, according to our recent survey.

TORONTO /CNW/ –A majority of Canadian small business owners may be close to retirement, yet many are not ready to exit their business and are uncertain about their post-business life, according to a new poll conducted by Environics Research for IPC Private Wealth of Investment Planning Counsel.
The survey revealed that 42 percent of Canadian small business owners are unsure about their future and their plans for retirement while more than a third (36%) don’t plan to give up ownership until they are not well enough to manage their business.

More than a third of those surveyed don’t plan to give up ownership until they are ill

“Succession planning for small business owners is a fundamental challenge,” says Sam Febbraro, Executive Vice President of Investment Planning Counsel. “There is no cookie-cutter approach to developing a business succession plan; but for any small business owner, it is important to plan things early on and not in a hurry or at the last minute when emotions are high.”

The Business Development Bank of Canada estimated that almost 60 percent of Canada’s small and medium-sized business owners are aged 50 or older, and four in ten are likely to leave their businesses within the next five years. With many entrepreneurs approaching retirement age, it’s interesting to note that 21 percent are not sure if they have enough money to retire and if their business will attract potential buyers.

When it comes to business transition, what small business owners fear most is the fact that their heirs will not want to take over their business. This is particularly true among high net worth entrepreneurs with more than $1 million in investable assets – 34 percent say they worry that their heirs are not interested, slightly higher than the 28 percent national average of business owners who share the same sentiment, according to the poll.

“Small business owners need to have a conversation with their heirs early on to determine whether they share the same passion for the business and if they have the skill set or are willing to be trained to take over the business,” says Paul Wylie, Senior Vice President of Business Development at IPC Private Wealth. “We suggest using a coach, someone removed from the family, to facilitate these conversations and stand as a family advisor, not just as a financial advisor.”

Other key findings in the IPC Private Wealth poll include:

Forty-two percent would rather sell their business; 31 percent would prefer to pass it on to heirs or family members; and 27 percent would like to shut their business down.
Those with more than $1 million in assets are the most likely to say they would sell their business (51%), while those with $100,000 to less than $250,000 in assets are most likely to prefer passing it on to heirs (39%).
Forty-eight percent have no plans to seek the help of a financial advisor on business succession planning.
Only 36 percent reported that their families were aware of their succession plan.

Survey methodology

A total of 300 well-qualified respondents across Canada were interviewed by Environics Research via an online methodology from July 24 to August 2, 2018. To qualify for the survey, the respondents had to be 18 years or older, self-employed full-time and small business owners with up to 50 employees. The BDC statistics cited were from BDC’s business succession study that was conducted in partnership with Nielsen among 2,500 Canadian entrepreneurs on their succession intentions.

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