Canadian small business owners haven’t fully prepared for the day they will hand off their business, according to a recent TD Waterhouse Business Succession Poll.
Three quarters (76%) of those polled admitted they don’t have a succession plan at all, which may cause major complications down the line.
“Small business owners typically spend a lifetime building their business but little to no time creating a succession plan,” says Carl Smith, regional vice-president and market leader with 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.”
According to the survey, the top reasons small business owners don’t have a succession plan are that they are still trying to figure out what that plan will be (45%), or that they just haven’t gotten around to it yet (31%).
Respondents were fairly divided in their intentions for their business when they retire, with 23% planning to close up shop, 20% planning to sell their business to a third party, and 18% planning on transferring to a family member. Over one quarter (27%) 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,” says Smith.
A succession plan should include a business plan, goals, details of the transition and tax plans, and should be created at least five to 10 years ahead of when the business owner plans to retire.