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Three quarters of Canadian small business owners don't have a succession plan
-- To mark Small Business Week, TD Waterhouse offers advice to small business owners to help ensure their business lives on --
TORONTO, Oct. 17, 2011 /CNW/ - When you retire, are you thinking of leaving your business to a family member or third party? Are you planning on selling it? Closing it? Have you decided? According to the TD Waterhouse Business Succession Poll, Canadian small business owners haven't fully prepared for the day when they will no longer be running their business: 76% of small business owners polled admitted they don't have a succession plan, 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, 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. It's disappointing to see how few Canadian small business owners have a succession plan to allow them to step back from running the business when they want to retire."
According to small business owners surveyed, the top reasons they don't have a succession plan for their business are that they are still trying to figure out what their plan will be (45%), or that they just haven't gotten around to it yet (31%).
What are you going to do?
Respondents were fairly divided in their intentions for their business when they retire, with 23% planning to close it, 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. "While you may think that you don't need anything formal if you are passing your business to a family member, a formal plan is still necessary to ensure a smooth transition."
What are the elements of a good plan?
Other common concerns from small business owners about succession planning are that it's complex, or they are unsure about what should be included. Your succession plan should include a number of things: your business plan, goals, details of the transition, and tax plans. "TD Waterhouse has succession planning experts who act as quarterbacks of the planning process — we can help you work with the various parties, such as accountants and lawyers, so that you can focus on running your business," says Smith.
When should you start planning?
Forty-six percent of those with a succession plan developed it within the first ten years of business ownership, and half developed their plan before they started planning their retirement.
"Ideally, small business owners should create a formal succession plan as early as possible, at least five to ten years ahead of when they want to retire," says Smith. "We encourage small business owners without a succession plan to visit their financial institution today. It takes very little time to get started and the benefits will be immeasurable when it's time to move away from your business."
Proper planning is key to making your retirement dreams a reality
Many small business owners have been burning the candle at both ends for many years, so retirement may come as a significant, and welcome, lifestyle change. However, small business owners polled know exactly how they want to spend their time: 45% said they plan on spending time with friends and family and 46% said they plan on travelling.
"After years of hard work, small business owners deserve a truly relaxing retirement," adds Smith. "It's essential to have a formalized plan in order to efficiently and effectively transition your business, so you can attain the maximum value, minimize taxes, and spend your golden years focusing on what you want to, not your former business."
About the TD Waterhouse Business Succession Plan Poll
From October 3 - 6, 2011, an online survey was conducted among a sample of 609 Canadian small-business owners who are Angus Reid Forum panel members. The margin of error on the full base — which measures sampling variability — is +/- 3.91%. Discrepancies in or between totals are due to rounding.
About TD Bank Group
The Toronto-Dominion Bank and its subsidiaries are collectively known as TD Bank Group (TD). TD is the sixth largest bank in North America by branches and serves approximately 20 million customers in four key businesses operating in a number of locations in key financial centres around the globe: Canadian Personal and Commercial Banking, including TD Canada Trust, TD Insurance, and TD Auto Finance Canada; Wealth Management, including TD Waterhouse and an investment in TD Ameritrade; U.S. Personal and Commercial Banking, including TD Bank, America's Most Convenient Bank, and TD Auto Finance U.S.; and Wholesale Banking, including TD Securities. TD also ranks among the world's leading online financial services firms, with more than 7 million online customers. TD had CDN$665 billion in assets on July 31, 2011. The Toronto-Dominion Bank trades under the symbol "TD" on the Toronto and New York Stock Exchanges.
About TD Waterhouse
TD Waterhouse represents the products and services offered by TD Waterhouse Canada Inc. (Member - Canadian Investor Protection Fund), TD Waterhouse Private Investment Counsel Inc., TD Waterhouse Insurance Services Inc., TD Waterhouse Private Banking (offered by The Toronto-Dominion Bank) and TD Waterhouse Private Trust (offered by The Canada Trust Company).
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