As the old saying goes, all good things must come to an end. Even your business and career. Even so, maybe it’s not surprising that entrepreneurs go about retirement differently than most folks, just as they go about work differently than most people.
According to a recent Manta survey, small business owners generally plan to wait until they are over 65 before retiring. Even then, according to the survey, one third plan to look for new work opportunities.
This begs the question – if you do in fact own your own business, what are you going to do with it when the time comes to move on? Essentially, you have three options. You can:
Let’s look at each.
1. Close up shop: While it would be great if you created a business that can be sold or shared with loved ones, that is not always the case. If, for instance, you have been self-employed and are a one-man (or woman) band, it is often difficult to transfer that ownership to someone else because you are the business.
In that case, closing up shop is “simply” a matter of communicating with customers about the upcoming change, paying outstanding invoices, selling assets, closing accounts, and literally closing the doors.
2. Sell the business: According to that same Manta survey, about one in five small business owners plan to use the sale of the business to fund their retirement. If this describes you, then there are a few things you need to do ahead of time to ensure a lucrative sale:
Spruce the place up: Just as you would want to increase the curb appeal of your home before selling it, you would want to do the same with your business.
Figure out what the business is worth: There are a few different ways to value a business.
- You can add up all assets, subtract liabilities, and go from there.
- You can use a “multiplier.” That is, sell it for three times profit. This is a common method, but know that different industries use different multipliers.
- The final option is to get an independent valuation. This is usually best. A professional valuation will give you an expert analysis of what the business is actually worth. That way, not only are you dealing with all the facts, but that valuation will carry weight with any potential buyer. Valuations can be obtained from business brokers, accounting firms, or banks.
- Related content: Be Like Goldilocks When Valuing the Sale of Your Business
Get your books in order: Buyers will want to see at least three years of financial statements and tax returns. One thing they are buying is certainty; they want and need to know how much they can reasonably expect to make if they buy your business.
Speak with your financial team: Before any sale, it would behoove you to know all tax and legal implications of any sale.
Stay profitable. Don’t let your business performance decline because you are too focused on either retiring or selling the business. Buyers buy businesses because those businesses make money.
3. Give it to your kids: One likely reason you started a business is that you wanted to create an asset to pass on to your children. This is both noble and good, but know that it doesn’t always work out as planned. Your kids may not want to go into your business. There may be squabbles over who gets how much or who will do what.
Personally, my dad left his successful carpet warehouse to my siblings and me, but when dad unexpectedly died, none of us were ready or old enough to run it. We ended up selling the business to the store manager, and only after a lot of hassle.
So the key here is communication. Let your offspring know what you want to do with the business, and make sure everyone is onboard.
Once you do that, get ready to say aloha, or ciao, or adios – whatever and wherever your grownup retirement wanderlust takes you.
Related content: The Importance of Succession Planning for Your Businesses
Steven D. Strauss is one of the world's leading experts on small business and is a lawyer, writer, and speaker. The senior small business columnist for USA Today, his Ask an Expert column is one of the most highly-syndicated business columns in the country. He is the best-selling author of 17 books, including his latest, The Small Business Bible, now out in a completely updated third edition. You can also listen to his weekly podcast, Small Business Success.© Steven D. Strauss.
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