For those with a strategy, the vast majority rely on a
"cocktail napkin" plan, putting their retirement at risk
TORONTO, March 27, 2015 /CNW/ - A new CIBC
(TSX: CM) (NYSE: CM) poll finds that just over half (57 per
cent) of Canadian business owners who are within 10 years of
retirement have business transition plans. But the vast majority of
them admit their plans are informal, despite the fact that many of
them are counting on selling their business and living off the
proceeds to fund their retirement.
Key findings of the poll:
- 57 per cent say they have a plan to transition their
business -- however, within this group:
-
- the vast majority (80 per cent) acknowledge their plans
are informal
- only 14 per cent created their plan in consultation with
advisors, such as an accountant, lawyer or banker
- another 6 per cent prepared a formal plan on their
own
- As many as 40 per cent of business owners have not
identified a successor
- Only 28 per cent have fully communicated their
transition plans to stakeholders and just 14 per cent have
fully prepared their successor
"Too many business owners are taking a false sense of security
from having a transition plan that is informal, which means they
are taking chances with their business and their retirement
income," says Shelley Swanlund, head
of Small Business, CIBC. "For many owners the value of their
business is a key part of their retirement fund, we have heard
stories from some business owners that they rely on a few ideas on
a cocktail napkin."
Owners banking on selling their business to fund
retirement
While many business owners have informal transition plans, they
are placing a high importance on a potential transaction to fund
their futures. When asked to assess their retirement income
sources, proceeds from the sale of their business ranked number one
at 28 per cent, followed by RRSPs, at 25 per
cent.
"When you consider how important a successful transition is to
your overall retirement planning, it speaks to the urgency for
business owners nearing retirement to create a plan with the help
of advisors that will allow them to maximize the value they receive
for their business," says Ms. Swanlund.
"As you build a formal transition plan, you will also need to
understand the financial situation of any potential new owners,"
she adds. "As a business owner looking to pass on or sell your
business to fund your retirement, you need to ensure the buyer has
the financing in place for a smooth transfer."
KEY POLL FINDINGS
Percentage of Canadian business owners who have a transition
plan for their business:
Yes |
57% |
Yes, but it is somewhat
informal |
45% |
Yes, I have a formal detailed plan I created with
my advisors |
8% |
Yes, I have a formal detailed plan I created on my
own |
3% |
No |
43% |
No, but I plan to create
one |
33% |
No, and I don't plan to create one |
10% |
Percentage of Canadian business owners who have adequately
prepared their successor or people to whom they are transitioning
their business:
Yes, fully |
14% |
Yes, somewhat |
33% |
No, not at all |
13% |
I haven't identified a
successor |
40% |
Percentage of Canadian business owners who feel they have
adequately communicated to their stakeholders about their plans for
their business:
Yes, fully |
28% |
Yes, somewhat |
36% |
No, not at all |
15% |
My transition timeframe is too far away |
22% |
From January 26th to 29th 2015,
an online survey was conducted among 803 randomly selected Canadian
business owners who are Angus Reid Forum panelists. The margin of
error—which measures sampling variability—is +/- 3.46%, 19 times
out of 20. The results have been statistically weighted according
to education, age, gender and region (and in Quebec language) Census data to ensure a
sample representative of the entire adult population of
Canada. Discrepancies in or
between totals are due to rounding.
CIBC Small Business Services
For more than 140 years, CIBC has been providing small business
owners with the advice, services, and support they need to thrive
and grow. CIBC recognizes that the business and personal finances
of small business owners are often intertwined, which can present
both opportunities and challenges. We believe that the best advice
comes from someone who understands your needs as a business owner
and as an individual.
CIBC provide small business owners with the services of a
dedicated CIBC Small Business Advisor, who acts as a single point
of contact for all small business owner needs. This experienced
professional is committed to understanding the business and the
industry in which small business owners operate, as well as their
personal financial goals. CIBC business advisors work with small
business owners to find integrated solutions to help them achieve
their vision for their business and their life.
About CIBC
CIBC is a leading Canadian-based global financial institution
with 11 million personal banking and business clients. Through our
three major business units - Retail and Business Banking, Wealth
Management and Wholesale Banking - CIBC offers a full range of
products and services through its comprehensive electronic banking
network, branches and offices across Canada with offices in the United States and around the world. You
can find other news releases and information about CIBC on our
corporate website at www.cibc.com/ca/media-centre/.
SOURCE CIBC