500,000 small business owners will retire in the next five years, and most of them don’t have a clear succession plan for exiting their business, according to the report released today by CIBC.

In the report, “Are Canadian Entrepreneurs Ready for Retirement?”, CIBC predicts that $1.2 trillion in business assets is poised to change hands by 2010, as a result of retiring entrepreneurs.

“In the next 15 years, half of Canada’s current small business owners expect to retire,” said “This figure is staggering, even though we know that there has been 7.5% growth annually in the number of firms run by individuals age 55 to 64 since 2000.”

The report notes that many small business owners need to enhance their preparations, both in terms of their RRSPs and their succession planning.

Only one in five small business owners (22%) maximized their RRSP contribution in 2003. Even among entrepreneurs closest to retirement (in the 55 to 64 age group), less than one-third (32%) maximized their 2003 RRSP contribution.

“By the end of 2003, the cumulative unused RRSP room for self-employed Canadians ballooned to $370 billion, or nearly $20,000 per small business owner with an RRSP,” said Rob Paterson, senior vp, CIBC Small Business Banking. “This suggests that entrepreneurs are not as ready for retirement as they can and should be.”

While entrepreneurs expect to derive 28% of their retirement income from RRSPs, the sale of their business will account for the largest share of their income (31%), with another 25% coming from other investments or income and 16% from pensions.

However, the report notes that when it comes to succession planning, only two in five small business owners have a clear plan for exiting their businesses. Approximately 15% of entrepreneurs plan to pass their business on to a family member, while 40% plan to sell their business. A whopping 60% of entrepreneurs aged 55 to 64 have yet to start discussing their exit plans with their family or business partners.