Having developed great relationships with numerous business owners all throughout Canada over the past several years, there is a trait that we have come to realize binds them all. Owners of small to medium-sized business are very detailed, determined and diligent when it comes to making successes out of their companies. They are all bound by “The Three D’s”, if you will.
In yesterday’s edition of The Toronto Star, however, an article highlighted the fact that there is a missing “D” in the minds of business owners. Apparently, typical entrepreneurs generally have mapped out each aspect of their businesses with the lone exception of what they will do when they are done. (The fourth “D”, we suppose).
Interestingly, most business owners do not contemplate their retirement. While they are able to make crucial decisions about their businesses at present, it appears as if most have no plans for what will take place with their businesses once they retire. Notably, a BMO survey, that was released last fall, found that half of small business owners over the age of 45 plan on retiring in the next ten years.
Says Tina Di Vito, director of retirement strategies for BMO Financial Group: “If you ask a business owner about their business plan, or where they want to take their company, they’ll be able to explain it because they have to have that information prepared when they go to the bank for financing…But if you ask that same business owner about his or her plans for retirement, they probably would not even have started thinking about it.”
It makes one wonder how entrepreneurs neglect to contemplate what will happen when they leave the businesses that they have worked so hard to create, build and help flourish. The survey found that an astounding “81 per cent of owners do not have a formal succession plan in place (and) as many as 40 per cent said they plan to just shut down the company when it’s time to retire.”
Di Vito notes that this type of improper planning can have drastic effects on the economy. The closing down of businesses, she says, can severely impact their respective communities. Of course, her recommendation is for business owners to begin seriously thinking about their successors once they retire.
Needless to say, owners should consider the amount of time, energy and money that they have invested into their businesses so that they do not let it all go to waste. They are encouraged to build an advisory team to help with both the personal and business side of retirement, perhaps utilizing the expertise of a lawyer, accountant or financial planner.
Clearly, there are very important decisions for business owners approaching their retirement ages to make. They include whether or not the company will be sold, passed on to family members, split into pieces or dissolved altogether. Such planning is crucial and as such, should not be taken lightly.