Do Business Owners Retire?
Posted in Newsletter Archive
February 3, 2020
By Mike McIsaac, CPA
According to a recent survey*, 45% of small business owners expect to exit their business within the next 5 years and another 25% within the next 5 years. As illustrated below, that is 70% over next 10 years!
Oddly, only 8% have a formal written succession plan in place!
If you are an entrepreneur and business owner, you probably don’t think about retirement. You probably say, “retirement is for other people with regular jobs and pension plans”. You might have neglected RRSPs, pensions or similar investment plans designed to fund that period of life other people call retirement. You might think “I’ll just keep running the business until . . .” what?
For business owners, retirement is when you close, transition, sell or are deemed to have sold your business. But before that, you need to be able to answer the question: What are you going to do when you close, transition or sell your business? If you can’t answer that question, in detail, then you are not ready to truly exit your business.
‘Back in the day’ the expectation was that small business owners would pass along their business to family members. Today, almost 75% of small businesses will be sold to a buyer unrelated to the family.
Taking Chips Off the Table
The First Key Step in planning for the succession of your business and retirement is to start documenting a retirement plan. Yes, it is a certainty that business owners will exit their business. What does ‘retiring’ mean for you? If you have a negative association with the concept of “retirement”, you need to change your thinking about being retired. Maybe calling it a transition or redirection or rebuilding, or just taking chips off the table, or whatever you need to call it but start thinking about what it means for you and your family.
Ideas to Help Start Your Business Succession Planning
- Discover Your New Direction – rediscover or find your current passions and start something new: a new business, new education (become a doctor!), dedicate your time to something that will drive you forward. Take on challenges and keep learning. It is important that you stay active, challenged and engaged and that your life not become focused entirely on passive activities like golf, travel or TV.
- Start with a list of ‘possibilities’ and then go back and fill in the details. This is important: allow yourself to dream again and commit the time to develop a long-term vision with the details of daily actions. It is not just the first 2 years of a travel location on your bucket list; it is a 20 to 30 year planning exercise!
- It’s Beyond Money. Don’t focus on the money. Lean on your professionals to deal with the money. Focus on re-inventing your identity. Discover what inspires you, keeps you engaged, and what the nuts and bolts of your ideal days will look like.
- Rediscover your youthful dreams – learn new sports, languages, skills, and projects; continuous active engagement in life. Read books, listen to podcasts, find new technology that will help build new routines, new habits, and the healthy choices required for a long and fruitful retirement!
- Start Today. Change your thinking! Build new networks of friends and activities. How will you build upon past successes and skills for use in your new direction?
Change is the only constant. Be proactive, think of the possibilities, start planning today and retire without regrets.
Renaissance Mergers & Acquisitions is a boutique professional firm focused on helping entrepreneurs sell their business. If you think you might be ready, call us to setup a coffee meeting and start the First Key Step towards your business succession and retirement.
Mike McIsaac is a CPA, founder and President of Renaissance Mergers & Acquisitions, a boutique advisory firm with offices in Vancouver and Edmonton specializing in the sale of private businesses with values from $5 million – $75 million. Renaissance has the largest group of professional advisors focused on the sale and succession of lower middle market sized business in Western Canada.
* Based on May 2018 survey of 2,507 Canadian Small Business owners conducted by the National Federation of Small Business Owners.