For people who work conventional jobs, preparing for retirement is straightforward. Work, save and then retire when you have accumulated enough money to last for the remainder of your life. For business owners, there are a lot of different factors that can come into play when planning for retirement. For people who worked hard to build a successful business, leaving the business, and beginning retirement is not cut and dry. There are financial and emotional considerations that accompany walking away from your life’s work. As a business owner, you probably have given some thought to what will happen to your business when you are ready to retire, but you may have options available that you hadn’t considered. Common ways that business owners stop working include family succession, retiring while retaining ownership, selling outright or liquidation. Understanding your options and understanding which solutions will work best for you and your business are important aspects of business continuation planning.
Your business likely has assets such as real estate or equipment, but have you considered other parts of your business that have a intangible value to you? Assets, current earnings, projected future earnings and even your ideas (intellectual property) factor into your business’s value. Understanding your business’s current value can help you to grow your valuation to position yourself more favorably for the future. A formalized business valuation will outline a detailed explanation of the worth of your company and can be valuable in helping you determine the market value of assets that may be liquidated or for determining the sales price of your business. You may choose to purposely grow your business to make it more marketable or you may determine that it is attractive as it. This can also help you determine any tax consequences that may occur with the sale of your business.
Have you considered who might want to step into your business when you retire? For many people a business partner or family member are the logical choice, however it’s not the only option. You may consider selling your business to someone that you don’t know such as a competitor. You may choose to sell it yourself or use a broker to market and negotiate a deal. Selling your business to someone you don’t know can take considerable time. If you are choosing to sell your business, you may want to get the ball rolling sooner than you expect to retire. It can take years to find a suitable buyer and sometimes deals fall through. Many times, when a buyer is assuming the business, the former owner will stay on for a period to help transition the business over and retain revenue and preserve client relationships. As a seller, you may also choose to finance the sale, which may be an attractive option for buyers.
While you may have envisioned leaving your business behind completely, you may consider stepping back and allowing employees and managers to handle your business while retaining ownership. For some businesses, this is a feasible option that can provide an income source for you while you enjoy additional freedom. When choosing to retain ownership, you may however, find yourself at a crossroads at some point in the future when you decide to relinquish ownership.
Determining how you will exit the day-to-day operations of your business can be a big undertaking. Careful planning can allow you to feel like you’ve exited on your terms. If you are not sure where to start, a business consultant who specializes in Business Continuation Planning or Exit Strategy Planning can help. Together, you can create a customized approach to exiting your business. Not sure where to start? We can help. Our team of business consultants are ready to help you create an efficient transfer of your business.
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Rebecca AgamaiteInvestment Advisor Representative Rebecca joined the firm in 2011 as an Investment Advisor Representative. In this role, she works with clients to manage their investment assets and help them obtain their financial objectives. Rebecca brings a great deal of experience to the team having worked for several years at Marshall & IIsley Bank and MetLife. She earned a Masters of Business Administration degree (with an emphasis on finance) from Concordia University. |
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