Launching a successful business is just one of the many small business challenges entrepreneurs face. Choosing a succession plan is another major consideration that must be decided upon once the enterprise is up and running.
A new study released by Canada's BMO Financial Group reveals that nearly six in 10 Canadian small businesses don't have a succession plan. While each entrepreneur likely has a different reason for not planning for their venture's long-term survival, 36 percent said that they feel it is too early to make this type of plan.
"It is never too early to start thinking about implementing a succession plan," said BMO's Cathy Pin. "When you consider that many Canadian business owners are set to retire in the next decade, planning for succession should be a priority for every business. You've worked hard to make your business a success, so it makes sense to have your legacy continue in the way you envision it."
However, the good news is that 42 percent do have succession plans in place. That figure represents a significant increase over the 15 percent of business owners who were considering the long term in 2010.
The survey of 500 Canadian business owners revealed that larger small businesses were more likely to have succession plans in place. Half of firms with 10 or more employees had them, while only a third of those with fewer than 10 employees did.
Of those with succession plans, 36 percent said that they want a family member to take over, while 26 percent said they would sell their business to an outside source.
Experts say there are a lot of things to consider when planning for the future of your business venture when you step down. For instance, should you sell it, dissolve it or transition leadership to a family member or a business partner?
It's also important to start thinking about and formulating a plan well in advance of implementing it. A decade before you plan to retire or step down to pursue other interests is advisable as it can help to ensure a smooth transition. Additionally, having a plan in place can guarantee the future of your business in the event of a sudden illness or death.
"Just like creating a business plan or buying insurance, implementing a succession plan well in advance of your projected retirement can guarantee a smooth transition process once it's time to execute it," said BMO's James Wong, who also co-authored a book about creating a succession plan.
Seeking outside help for your plan is also advised. A financial advisor or small business attorney can help entrepreneurs create a well-tailored succession plan.