What Do You Do With Your Business When You Retire?
If you are contemplating retirement and have managed to build up a successful business and created something of value it is important that you consider all your options when it’s time to stop working and enjoy a well-earned extended rest.
The business could be a potentially substantial source of retirement cash and that is why you need to get a professional valuation and help with sell-side transaction services so that your business is buyer-ready.
Here is a look at the various options open to you as a business owner and what aspects you need to consider if you are wanting to sell your company and start a new chapter in your life.
Don’t make too many assumptions
If you are heavily reliant on selling your business to fund your retirement plans you could be in for a bit of a rude awakening.
If you have managed to create a successful business that is profitable and enjoys a healthy balance sheet it would seem fair to assume that you should not have problems finding someone who is willing to pay good money to take over where you left off.
That may well be the case, but it doesn’t hurt to have a dose of realism so that you are prepared for what lies ahead. Approximately, a quarter of businesses that are up for sale end up being sold, which means that more go unsold than change hands for cash as a going concern.
With those low odds of selling success, it highlights how vital it is that you prepare your business for sale properly and get professional help where it is needed to carry out the required due diligence and valuation.
Have a plan
Planning for retirement takes time and the same comment applies to making arrangements to sell your business.
One aspect of selling that often gets overlooked is how emotionally challenging you might find it to sell something that you invested so much time and money in.
You may well have reached a decision about retiring and have some firm ideas on when you want this to happen but it also pays to prepare yourself mentally for the feelings of doubt and emotional attachment that is commonplace when you are talking about something that has consumed a good part of your life.
Fear of what lies ahead and the finality of no longer owning your business can be a troubling aspect to contend with. Try to anticipate this happening and if you have a solid plan in place it will help reaffirm you are making the right decision when doubts surface.
Know what you want to do after your business has sold
One of the fundamental reasons why a business sale doesn’t go through is not because there is a problem with the figures or the financing of the deal but because the owner has second thoughts and walks away at the last moment.
Even if you have a retirement plan that you want to execute you might get cold feet because you worry about what you will do with all your spare time once you no longer have the business to take care of.
If you think that could be a problem for you, think about setting up a new hobby or even a new line of work that you can do as and when you want to keep you busy in retirement.
Knowing what you will do next with your time will help you cope with the almost-inevitable emotional turmoil you will experience when a deal is on the table and it’s time to sell your business.
Getting to grips with the facts and figures
Another hugely important aspect relating to the potential sale of your business is to make sure that you get all the facts and figures in order so that you can answer any questions from potential buyers.
As part of the process of preparing your business for sale, you will want to arrange a professional valuation.
This another key area of the transaction that you might find challenging. This is often down to the fact that you would not be alone in putting a premium on all the years of toil that you have put into your business, meaning you might expect to sell for a higher price than the firm is actually worth on paper.
This is what sell-side is all about, as the due diligence will identify any potential issues and arrive at what should be a fair and realistic valuation.
This third-party valuation figure might differ somewhat to the price you have put on your business, especially when you look to factor in what you have invested in the venture.
However, if you do want to successfully sell your business and crystalize your retirement plans it would be preferable to have all the facts and data about your business to hand and be willing to listen to a reasoned argument as to why an independent valuation differs from your own expectations.
Have a plan B
As already outlined, it is not a great strategy to rely entirely on selling your business to fund your retirement plans, which is why you have to develop a plan B that you can put into action if things don’t go to plan.
You can’t be expected to know everything about financial planning and it would make sense to seek out a financial planning professional who can show you exactly how much you need to fund your retirement plans.
These options should be on the assumption that you sell your business and what happens to your finances if you don’t.
You could decide to scale down the business and keep it going or find someone else to run it while you keep an element of control.
These are all potential options and serve to illustrate why it matters that you plan your exit strategy well in advance of the intended retirement date.
You have worked hard to build a legacy with your business and it would definitely pay to apply the same level of commitment to funding your retirement aspirations.