The financial meltdown has caused many entrepreneurs to re-evaluate their retirement plans and wealth planning. Business owners face postponement, if not elimination, of retirement plans because of a decrease in the market valuation necessary to support those plans. Yet changing Canadian demographics may in the long-term have an even greater impact than the current recession for the small and medium sized enterprises.
Recessions come and go. Anyone in business more than twenty years has gone through at least one prior recession. When a recession first takes hold, it always seems that this one is the “worst” or the “big one” or “like the great depression”. Yet while there are failures, most businesses survive and within a few years recover with the rest of the economy and the retirement plan continues, perhaps slightly postponed. So what is different about demographics, and why might demographics pose an even larger threat to a succession, liquidity and wealth planning?
Demographics are about population characteristics. Canada’s is aging. The baby boom generation will complete its journey into retirement in the next ten to fifteen years. The generation after that is smaller, and the generation after that is smaller still. Records show that in 1921, one in twenty persons was over 65 years of age; by 2026 one in five persons in Canada will be over the age of 65. Virtually nothing can change this. A massive (and highly unlikely) baby boom will not change this.
The implication for the owner of a small or medium sized business is that there will be relatively more sellers, and fewer buyers, than there are today. Demographics dictate that this will get worse, not better, for the foreseeable future. The business owners that succeed with their retirement plans are those that plan for succession and liquidity now, and implement the plan well in advance of the day that they want to turn over the keys to the business and hit the golf links.
Talk to us about how to position your business for succession and liquidity, so that your retirement plan works for you.
Topics: business law, Ottawa business Lawyer, Kanata Business Lawyer, estate Lawyer, Ottawa estate Lawyer, succession, succession planning, wealth planning, selling your business