For many business owners, the idea of selling the company they built from the ground up seems like the perfect way to retire. After all, what better reward for years of late nights, stress, and sacrifice than a big payout?

But here’s the hard truth: counting on the sale of your business as your retirement plan is risky.

The Myth of the Big Exit

We’ve all heard stories about entrepreneurs who sell for millions and ride off into the sunset. But in reality, these exits are the exception, not the rule. According to the Canadian Federation of Independent Business (CFIB), over 76% of small business owners in Canada plan to exit their business in the next 10 years—but only 1 in 10 have a formal succession plan in place.

Even more concerning? Many never find a buyer at all. And those who do often receive far less than they hoped for.

The Reality of Business Succession in Canada

According to the Canadian Federation of Independent Business (CFIB), over 76% of small to medium-sized business owners plan to exit their business within the next decade. However, only about 9% have a formal succession plan in place. 

This lack of planning can lead to several challenges: 

• Finding a Suitable Buyer: Over half (54%) of business owners cite difficulty in finding a suitable buyer or successor as a significant obstacle.
• Valuation Challenges: Nearly 43% struggle with determining the value of their business, which can lead to undervaluation and reduced retirement funds.
• Business Dependency: About 39% report that their business is too reliant on them for day-to-day operations, making it less attractive to potential buyers. 

Market Saturation and Its Implications

With a significant number of business owners planning to sell in the coming years, the market could become saturated. This influx can drive down business valuations, making it harder for sellers to get the price they expect. Additionally, economic uncertainties and changing market conditions can further impact the sale process.

Diversifying Your Retirement Strategy

Given these challenges, it's essential to diversify your retirement planning:

1. Start Early: Begin succession planning well in advance. This allows time to groom successors, optimize business operations, and enhance value.
2. Seek Professional Advice: Engage financial advisors, accountants, and legal professionals to guide you through the succession process and explore other retirement income avenues.
3. Invest Outside the Business: Regularly allocate funds to retirement savings plans like RRSPs or TFSAs. This ensures you have assets independent of your business.
4. Consider Alternative Exit Strategies: If selling isn't viable, explore options like employee buyouts, family succession, or merging with another business.

Conclusion

While selling your business can be a component of your retirement plan, it shouldn't be the sole strategy. Diversifying your retirement planning ensures financial security, regardless of market conditions or business sale outcomes. By starting early and seeking professional guidance, you can build a robust retirement plan that doesn't rely entirely on the sale of your business.