One quarter of Canada’s small business owners expect their RRSP contributions to be their primary source of income in retirement, finds a Scotiabank poll. This is followed by proceeds from selling their businesses (17%), savings (15%) and government pensions (8%).
The study also found 25% of small biz owners have not thought about what they want to happen to their businesses when they retire, while only 19% say they have a succession plan.
“While overall RSP contributions are lower this year among Canadians generally, small business owners rank it at the top of the list as a source of income in their retirement years, potentially overlooking the value their business could add to their nest egg,” says Tina Di Vito, director of Business Succession at Scotiabank. “We want to encourage them to take a look at both their business and personal balance sheets to make the most of their retirement years.”
Additional findings include:
- On average, small business owners expect to retire at age 65, while 18% are uncertain at what age they will retire, and 14% have no plans to retire;
- 52% of Canadians hold an RRSP, with 31% planning to contribute to this year, a decrease from 39% in both 2012 and 2011;
- Finding and keeping customers (42%) is the most frequently cited concern of small business owners, followed by competition in the marketplace (36%) and the health of the Canadian economy (30%). Concern about succession planning ranks lower with only 19% noting this as a pressing issue;
- Small business owners think that a succession plan should be in place seven years prior to retirement;
- Small business owners are most likely to turn to an accountant (25%) first for help in developing a succession plan, followed by a financial planner (18%);
- 68% currently have a business plan, while just 27% of Canadians have a written financial plan.
Here are some succession planning tips.
1. Have a well thought out and clearly documented plan.
2. Have contingency plans in place to deal with unplanned, catastrophic circumstances that could jeopardize your business and your family in the short term.
3. Establish a target date to transfer ownership of your business.
4. Know the current value of your business and have a target value established for the ultimate sale price of your business.
5. Consider your exit strategy. Will you be transferring your business to a family member or selling to a third party?
6. Have a plan in place that will maximize the value of transferrable assets and protect that value of your business up to the planned transition date.
7. Assemble a team of advisors to deal with the various aspects of ownership transfer.