Nearly half of Canadian business owners have not planned how they will hand over their companies to new proprietors.
According to a recent CIBC poll, only 57% of Canadian business owners who are within ten years of retirement say they have business transition plans. Within this group, the vast majority (80%) admit that their plans are informal.
The online survey of 803 randomly selected Canadian business owners found that just 14% had created their succession plan with the help of professional advisors such as accountants, lawyers, or bankers, while 6% had prepared a formal plan on their own. What's more, 40% of business owners indicated that they had yet to identify a successor.
"Too many business owners are taking a false sense of security from having a transition plan that is informal, which means they are taking chances with their business and their retirement income," says Shelley Swanlund, head of small business at CIBC. "For many owners the value of their business is a key part of their retirement fund; we have heard stories from some business owners that they rely on a few ideas on a cocktail napkin."
In fact, when asked to name their retirement income sources, the poll found that owners ranked proceeds from the sale of their businesses number one at 28%, followed by RRSPs at 25%.
"When you consider how important a successful transition is to your overall retirement planning, it speaks to the urgency for business owners nearing retirement to create a plan with the help of advisors that will allow them to maximize the value they receive for their business," comments Swanlund.