The next 10 years will see 50 per cent of Boomer small business(1) owners retiring. Despite these numbers, a new BMO Retirement Institute Report predicts several factors will help prevent this retirement wave from punishing the Canadian economy

TORONTO - A BMO Retirement Institute survey released today reveals that 50 per cent of small business owners over the age of 45 plan to retire over the next 10 years which could represent a significant threat to the survival of their businesses and to the economy. However, findings from the BMO Retirement Institute show these threats could be reduced based on four mitigating factors:

- A shift to succession planning by small businesses.

- Eighty-one per cent of owners do not have a formal succession plan in place with 4 in 10 planning to close down their business when they fully retire.

- Recession economics are prompting boomer small business owners to delay their exit.

- Fifty-six per cent have said the recession has had a negative impact on their bottom line and 4 in 10 have revised their retirement date due to the economic recession.

- Retiring boomers will swell the ranks of the self-employed; and

- The overwhelmingly positive experience of entrepreneurs will influence others to start their own business.

- Ninety-two per cent of small and medium enterprise owners said if they could do it all over again, they would still decide to own their own business.

Opportunity Knocks

Without researching and investigating all options for exiting the business, owners may fail to appreciate its potential value. Having a succession plan or exit strategy in place could minimize the number of business closures upon retirement.

"The process of succession planning should begin well in advance of the target retirement date since it can take years to develop a comprehensive plan. A formal succession plan should include a retirement timetable, the estimated value of business as well as potential successors or purchasers", said Tina Di Vito, Director, Retirement Strategies, BMO Financial Group. Di Vito also heads up the BMO Retirement Institute, a think tank set up by the Bank to provide leading perspectives and help make sense of retirement issues.

Boomers Working Longer

Small business owners, over age 45, are working longer. This decision is partially influenced by boomers' unique attitude toward aging and work(2) , as well as the impact of recent economic conditions. Overall, the Institute found the recession has had a negative impact on the bottom line of almost 60 per cent of businesses. "Four in ten small business owners over age 45 said the recession has caused them to revise their retirement date. If the attitude towards working longer lingers even as the recession eases, it will reduce the number of small business owners who will retire within the next 10 years. That is good news for the economy," added Di Vito.

"Most business owners are so focused on growing and maintaining their business they find it difficult and even emotionally draining to contemplate selling or winding it down. Our best advice is to speak to our experts in commercial banking and wealth management. They can provide guidance and direction on how to put a succession plan in place," said Gail Cocker, Senior Vice President, Commercial Banking, BMO Bank of Montreal.

Trend in Self Employment May Lead to Boom in New Businesses

Between 1990 and 2008, growth in the number of self-employed individuals was mostly among those aged over 55 years, more than doubling from 350,000 to 723,000.(3)

Also, recent BMO Economics research(4) indicates that self-employment tends to increase at a steady rate, no matter what is happening in the economy. "If the positive trend to self-employment continues, it will lessen the economic impact that results from small business owners retiring. With more boomers possibly engaging in self-employment following retirement, the Institute believes that Canada could well experience a boom in new businesses as the oldest members of the largest cohort in history are about to turn 64. This may allow additional time for owners to prepare a formal succession plan which may include selling the business in a more favorable environment," said Di Vito.

Always Nice to Be Your Own Boss

Enthusiastic entrepreneurs are exerting a positive influence on those who are considering starting their own business. Satisfied business owners convey the message that opportunities await those who are willing to take a risk by becoming a business owner. As they look back on their own experience, 92 per cent of business owners report they would happily do it all over again while others indicate they will never retire."

"Satisfied business owners are exerting a persuasive influence on those who are considering starting their own business. This will help refresh the small business ranks with a diverse pool of young people, immigrants, women and retiring boomers who are eager to start their own business," added Di Vito.