Retirement has changed.
For increasing numbers of Canadians, retirement is not the end of it all, it's a new beginning -- one where they're in charge. The shift from years in a corporate job may mean re-emergence as a business owner -- president, CEO, silent partner...anything but "retiree."
Maturity teaches the folly of reinventing the wheel. Most will skip over starting a new business from scratch to fast forward their ambition through the purchase of an existing venture. Whether life on your terms means embracing a dream vocation, diving into a business challenge or mining a good investment to finance the years ahead, you'll be pleased to hear the future looks bright for those who'll be shopping for a good "retirement" vehicle in the years ahead.
A recent CIBC [ CIBC ] study "Are Canadian Entrepreneurs Ready for Retirement?" suggests that as many as 500,000 small businesses across Canada may be up for sale over the coming five years. Within the next 15 years, more than half the country's small business owners are expected to retire. In this environment, business brokers, commercial real estate brokerages and real estate professionals who sell businesses should find growing demand for their expertise.
FYI: The CIBC study defined "small business" as firms with 1 to 15 employees and 2003 revenues under C$5 million. It considered the randomly-selected sample of 1,829 Canadian small business owners as accurate within +/- 2.3 percentage points.
By 2010, an estimated C$1.2 trillion in business assets may be up for grabs. In some cases, the next generation or the grand-generation will step into management shoes, however, reportedly only two in five small business owners have a clear plan for exiting their businesses. Personal losses aside, this situation could have significant economic costs resulting from reduced productivity, job losses, premature sales and increased bankruptcy rates.
If you are interested in buying a business, this study should encourage you. Only 15 percent of owners near retirement age (55 to 64) have locked into succession plans that might keep buyers out. Business owners in primary industries like agriculture, mining and forestry demonstrate a strong tendency to transfer their businesses to a family member. That pattern is also common in food and retail businesses. These entrepreneurs typically decide to transfer or sell the business to a family member, normally their children. That leaves more than 84 percent of entrepreneurs aged 55 to 64 who may be receptive to your advances. Owners in Saskatchewan, Alberta, and Atlantic Canada are eager to retire -- nearly one quarter of them want out within the next five years.
Although some have not begun discussing their exit plans with family or business partners, over 40 percent of small business owners have decided to sell their enterprises to outside interests. Entrepreneurs in the Prairies and British Columbia appear most intent on selling to non-family.
In Ontario and Quebec, owners in tourism, primary industries and food service show the greatest interest in retirement by 2010, but these provinces fall below the 22 percent national average of small business owners planning to retire by the end of the decade. Technology may explain the Ontario/Quebec anomaly. The service and technology-oriented businesses concentrated in these high population provinces are less physically demanding for owners. Technology favours home-based and small office ventures and this convenience and low overhead also provides business flexibility.
Owners not in a hurry to cash out may still be receptive to gradually pulling back in a transitional take-over by "budding" entrepreneurs.
Informal funding already drives entrepreneurial ventures. The February 9, 2005 issue of Warrillow Weekly Warrillow Weekly ], an online newsletter from Toronto-based Warrillow & Co. that promises to "get inside the head of a small business owner every week," states that "entrepreneurs not only fuel the majority of their start-up capital, but compared to their non-entrepreneur counterparts, they are four times more likely to informally invest in another entrepreneurs' business."
The CIBC study uses the traditional threshold ages retirement of 55 to 64. The nature of retirement has changed dramatically and the transformation has only begun. As challenges against mandatory retirement at 65 and against ageism continue, the projected shift in ownership control may move further into the future.
Succession planning, a vital element in successful business design and development, is the most overlooked aspect of business planning, largely because it draws attention to age and retirement -- two unpopular words in the ageist world of business. Since small business is usually built and maintained on the personality of the originator, successfully separating the creator from its creation can be a challenging process for both. You may be the creative solution!