A quarter of small-business owners want to get out of the work world within the next five years. But only a fraction of those aspiring retirees have any idea how to do it, said a senior executive with the Royal Bank of Canada Tuesday.

Many small-sector owners say they want out within the next half-decade, but just are not prepared for that event, Nadia Ceciliot, RBC's national manager for commercial financial services.

"They don't know where to get started," she said.

According to a 2007 RBC survey, 25 per cent of small-business owners wanted to exit their companies within the next five years. But only 23 per cent of those who said they want to retire have done any planning for that life change, the survey found.

Unsuccessful succession

In the business world, succession planning — the ability to turn a company, usually within a single family, over to the next generation — is an area where owners of small enterprises consistently received failing grades.

Only a third of businesses survive the transition to the next generation, according to figures from the consulting firm BDO Dunwoody. And only a third of that third get handed down to grandchildren.

"The numbers appear alarming," BDO Dunwoody said in a recent publication.

Another study, undertaken by the Australian National Bank, estimated that only 10 per cent of Australian small-business owners had a decent succession plan in place.

The problems are several, according to experts. Sometimes there is no qualified successor to hand over the reins to. Some kids just don't want to continue in the family business, Ceciliot said.

"[Handing the business over] might be your idea. It might not be theirs. That is conversation they need to have," she said.

In other cases, however, businesses fail because company owners don't face up to their inevitable exit from the company and don't have proper financial plans in place.

"At first glance, this lack of planning seems incomprehensible. But when you look at the personal and family issues that are involved, it is easy to understand why many people just don't want to deal with the issue of business succession," BDO Dunwoody said.

In Canada, 62 per cent of the small-business owners surveyed by RBC were age 50 or older. That means a large number of small-enterprise executives need to start planning for their departure sooner rather than later, RBC suggested.