Is Selling your Business your Retirement Fund Plan?
Updated: Apr 23, 2020
When I was asked to conduct research on succession planning a couple years ago, I was really surprised by the findings. Like most people, I had simply assumed that the majority of Canadian small business owners had a plan in place for their retirement or at least an idea of who would be stepping in to replace them. The baby boomer generation was in the process of retiring, and an estimated $1 trillion to $4 trillion in wealth was expected to be transferred within the Small and Medium Enterprise (SME) sector. SMEs are vital to the Canadian economy, providing more than 90% of private employment and creating 70% of new jobs.
My research was originally published by Troy Media in March 2018. It echoed repeated warnings from the Canadian Federation of Independent Business and other associations that most SME business owners were fundamentally unprepared to sell their business for retirement. Governments, think tanks, and industry leaders were urged to raise awareness of the critical need for succession planning in this sector.
Since then, nothing has changed. And the stakes are getting higher. Owners of family run businesses should not simply assume that the next generation is able or willing to assume a future role. Similarly, informal agreements between partners are risky and subject to future disagreement. Further to this, the selling of SMEs is increasingly becoming a buyers' market.
A thoroughly planned strategy enables owners to exit their business under the best possible conditions. It is a plan of action that maximizes business value and marketability, minimizes legal and tax issues, reduces costly financial mistakes, and provides a framework for a buyer-seller agreement. Given that most SME owners depend on selling their business to finance their retirement, this is a prudent investment to make. LM Johnston Consulting can help with all you need to ensure you get the best value for your sale.