What will happen to your company when you retire? This is a delicate question for many small business owners, as revealed a recent study.
According to a survey published in mid-October by TD Bank subsidiary TD Waterhouse, small businesses are not fully prepared for their owner’s retirement. The online survey of 609 Canadian small business owners found that 76% of them do not have a succession plan in place.
Sell, pass on or close?
One of the reasons for this situation and the leading cause of difficulty in building a buyout or succession plan for the future is hesitation with respect to the many options open to the company and its owner.
Intentions about what to do when comes the time to retire were mixed, with 18% of respondents planning to leave the business to a family member, 20% to sell it to a third party, 23% to close it and over one quarter undecided.
Planning for the future as early as possible
While plans for the future differ, uncertainty remains, because only 24% of small business owners have a succession plan ready to be applied when they retire. 46% of those with a succession plan developed it within the first ten years of business ownership, and half developed it before they started planning their retirement.
TD Waterhouse says that exit strategies are a must. The purpose of having a comprehensive plan in place is to allow for a successful transition, so that the investment and all the hard work the owner has put into the business over the years is reflected when he or she is no longer there.