Canadian small business owners haven't fully prepared for the day when they will no longer be running their business: 76 per cent admit they don't have a succession plan, according to a TD Waterhouse survey.
"Small business owners typically spend a lifetime building their business but little to no time creating a succession plan," said Carl Smith, regional vice-president and market leader at TD Waterhouse, private client services. "Without a formal succession plan in place, you could miss out on important tax advantages or getting the maximum value for your business. It's disappointing to see how few Canadian small business owners have a succession plan to allow them to step back from running the business when they want to retire."
The top reasons small businesses don't have a succession plan is they are still trying to figure out what their plan will be (45 per cent) or they just haven't gotten around to it yet (31 per cent), found the survey of 609 business owners.
Respondents were fairly divided when it came to their intentions for their business when they retire, with 23 per cent planning to close it, 20 per cent planning to sell their business to a third party and 18 per cent planning on transferring to a family member. More than one-quarter (27 per cent) were unsure about what they will do when it comes time to retire.
"Regardless of your exit strategy, it's essential to have a formal and comprehensive plan in place to allow for a successful transition, so all the hard work you've put into the business is reflected when you're no longer there," said Smith. "While you may think that you don't need anything formal if you are passing your business to a family member, a formal plan is still necessary to ensure a smooth transition."
Forty-six percent of those with a succession plan developed it within the first 10 years of business ownership, found the survey, while one-half developed their plan before they started planning their retirement.
"Ideally, small business owners should create a formal succession plan as early as possible, at least five to 10 years ahead of when they want to retire," said Smith.
© Copyright Canadian HR Reporter, HAB Press. All rights reserved.