It’s a great plan—build a business, sell it someday, retire—but research from BMO shows that many business owners are struggling to do that.
Many business owners have their retirement savings locked up in their businesses—where those assets could get stuck. The hope is that when they’re ready to retire, they’ll find a willing buyer who’ll provide all the money they need to live out their retirement dreams. Sadly, finding a buyer when it comes to time to sell may not be all that easy—and then what?
Research recently released by BMO shows that many entrepreneurs simply don’t have a backup plan beyond hanging on to the business for as long as it takes to sell it. However, this isn’t the easiest time to shift a business, no matter how good it may be.
Of the business owners surveyed, BMO found that 61% of those aged 45–65 had less than $100,000 of retirement savings—everything else was tied up in their businesses. Only 10% of all the business owners surveyed had more than $500,000 in liquid assets saved for their retirement.
The research also found that only 8% of the Canadian business owners surveyed had any kind of succession plan in place, and 42% spoke of the difficulty of finding a suitable buyer or successor.
BMO experts recommend that business owners think early about selling up and not leave it to the last minute. They also recommend diversifying your retirement savings, funneling equity out of your business as you go along in order to be sure that you have a nest egg.
Hoping for the best won’t cut it—you need to be realistic and plan ahead.
By Lola Augustine Brown