Optometrist’s vision: Keep it all in the family
Father planned retirement well Son Kerry ready to take over the reins
After 35 years in practice, Stan Salsberg is retiring. The 61- year-old optometrist who owns Eyes on Sheppard, is passing on his practice to his son, Kerry Salsberg, who joined the practice 11 years ago.
“ I decided a couple of years ago that I wasn’t going to let my son be in my shadows,” he says.
Planning and carrying out the transition from father to son took about a year and a half. Salsberg consulted with lawyers, financial advisers and accountants before deciding to use a wealth management company to look after his estate planning and the transfer of ownership of his practice. He knew he needed professional help to get the job done right.
Salsberg says most small business owners have the same problem when it comes to planning their retirement: They have a lot of equity, but little cash flow. He’s counting on his son’s regular payments for the practice and the income generated by his two investments, one of which is his RRSPs, to fund his retirement. Advanced planning by small business owners for their retirement pays off, says Catherine Swift, president and CEO of the Canadian Federation of Independent Business or CFIB. “The key message is don’t think you can do this ( retirement and succession planning) properly in a short period of time,” she says. “ A lot of people think they can pull this off in six months or a year and you can’t.”
Swift says small business owners procrastinate when it comes to planning their retirement and underestimate the amount of time needed to adequately create and carry out a retirement and succession plan. The CFIB suggests small business owners take a minimum of five years to establish a succession plan, says Swift, adding that in an ideal world, a succession plan would be in place right from the moment the business is up and running. A2004 study conducted by the CFIB found that about 40 per cent of small business owners surveyed planned to retire within five years, but very few had a succession plan in place, she says.
Swift recommends small business owners research their retirement years in advance and come up with a written plan, asking for help along the way.
“Get some general information from a tax lawyer or an accountant so that you understand the rules of retirement and selling your business,” she says. “ Most small business owners don’t have enough experience to do this on their own. People plan for retirement once in their lifetime.” A small business owner who plans to sell his or her business outside the family has to leave time to court potential buyers, says Swift.
“ You don’t want to just pass on your business, you want to get the maximum value for it and keep the business healthy,” she says. A post- succession plan carried out by the former owner, including offering advice and experience, can help ensure the success of the business after the transition, says Swift. A small business owner’s personal retirement savings can come from many sources, all of which should be planned years in advance. The 2004 CFIB study found that 90 per cent of small business owners surveyed counted their personal savings, the proceeds from selling their business and the $ 500,000 capital gains exemption as the top three sources for their retirement. Benjamin Tal, a senior economist with CIBC World Markets Inc., says small business owners need to plan for multiple sources of retirement income.
“ Small business owners by nature are optimistic,” he says. “ They believe in their business and believe in themselves. But this ( planning for retirement) is not a time to be optimistic, but a time to be conservative in planning.”
According to the 2004 CIBC Small Business Outlook Poll, says Tal, about 31 per cent of small business owners plan on selling their business to generate their main retirement income. Small business owners also plan on drawing on RRSPs, other investments and pensions to fund their retirement, he says.
Tal encourages small business owners to take advantage and maximize their RRSPs — and to think about retirement as early as possible.
“ It’s much more difficult to get a high rate of return because of low interest rates compared to 10 years ago,” he says. “ Starting to save in your 50s is too late.” But planning ahead for retirement and business succession is difficult for most small business owners who love what they do and who don’t want to walk away from their work, says Aron Pervin, owner of Pervin Family Business, a family business advisory company in Toronto.
That’s the reason Salsberg plans to continue seeing a few patients and act as an adviser to the optometry practice. Not because he needs the money — he has a suitable nest egg — but because he cares deeply about the practice and the profession.
“Retirement is a dirty word with entrepreneurs,” laughs Pervin. “ My clients never retire, I’ll never retire. We’re just not forced to work at a certain stage in our life to pay for either our modest or elaborate lifestyle requirements.”