As small business owners retire, the effects will be felt in communities across Canada, impacting their families, society, and the economy.
According to the latest analysis by Barlow Research, the average small business owner is just over 60 years of age, and almost 40 per cent are 65 years or older – a percentage that increased 19 per cent in just the past year.
Barlow Research also indicates more than a third of small business owners say they will transition ownership of their business within the next five years. Although most intend to close, liquidate or sell their business to an outside party, those approaching retirement would much rather transfer ownership of their business to a family member.
Part of the reason for that may be because more than 70 per cent of small business owners would like to keep working at least part time after they retire.
These observations clearly show the generational wealth transfer already in progress will continue to accelerate.
Small business owners must prepare for the risks and opportunities of transferring their wealth to family members and take the necessary steps to protect their business and hard-earned money.
A comprehensive and personalized business succession plan is a critical component of any small business owner’s overall wealth management strategy. This succession plan must be expertly tailored to reflect your unique circumstances, and achieve your personal goals.
Start by planning ahead.
Your succession plan should be in place years before you plan to transfer ownership of your business to a family member. In fact, today’s advisers encourage small business owners to develop one when first starting their business. More time in the planning phase generally makes for an easier transition.
Get your family involved.
Money can bring families together, or drive them apart, so it is critical your children are involved in the succession planning process. Constructive dialogue with qualified guidance can help prevent conflict, and ensure your succession plan accurately reflects your family’s wishes.
For example, your children may wish to all share ownership of the business, but only one may want to manage it. Ensure your succession plan supports the individual ambitions of your children.
Share your expertise.
The years leading up to your retirement are the best time to impart your knowledge and expertise to your children. Get them involved in the daily running of the business if they wish to continue it after you retire. Introduce them to your business network. Give them a clear and complete picture of exactly what owning and operating your business entails.
If you are one of the growing number of small business owners quickly approaching retirement, these steps can help ensure your business and family continue to thrive for years to come.