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Managing Your Finances

2 Posts authored by: Steve Strauss

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:

 

  • Close up shop
  • Sell the business, or
  • Give it to your kids53069262_s.jpg

 

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.

 

 

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

The Importance of Succession Planning for Your Businesses      Putting The Success In Your Succession Plan

 

 

About Steve StraussSteve Strauss Headshot New.png

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 SuccessSteven D. Strauss.

 

Web: www.theselfemployed.com or Twitter: @SteveStrauss

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Bank of America, N.A. engages with Steve Strauss to provide informational materials for your discussion or review purposes only. Steve Strauss is a registered trademark, used pursuant to license. The third parties within articles are used under license from Steve Strauss. Consult your financial, legal and accounting advisors, as neither Bank of America, its affiliates, nor their employees provide legal, accounting and tax advice.

 

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My business recently sent off a tax payment to local authorities and it reminded me of an incident not long ago that I think contains a valuable lesson for all entrepreneurs.

 

For years, I did my personal and corporate taxes on my own. This was mainly because I thought that my legal background afforded me the knowledge to do so. And for a long time I was right… until I wasn’t.

 

It was April 14th a few years ago, and I was struggling with my tax return when I finally concluded that I needed expert assistance. So I filed for an extension, put out some feelers, and interviewed a few accountants. The first two were competent, but nothing special. Then I met David, the guy I hired.

 

I hired him for a few reasons. Yes, he was every bit as smart and experienced as the other two people I had spoken with, but the difference was two-fold:

 

  • First, he had a way of explaining things that was neither jargon-y nor condescending. Indeed, his delivery was friendly and understandable.
  • Second, he made me feel comfortable.

 

That second fact is not unimportant. I was hiring a professional because I needed professional help. There was money at stake, I was unsure of the outcome, and the IRS was involved – all of which are reasons to feel a little uncomfortable.

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But David’s easy-going manner evoked confidence in me right from the start. He cracked jokes and laughed easily. He was sharp. I liked him and believed that he could help me. And I was right. Not only did he do his job superbly, but even when delivering what could have been uncomfortable news (“You owe such and such”), he did so in a way that made it easy to digest.

 

Certainly my experience could have been different. Another CPA, one less emotionally intelligent, might have done the same competent job, but I probably wouldn’t have left the experience wanting to refer them business as I wanted to with David. Indeed, I have since recommended David to several friends and colleagues.

 

That’s the lesson. There are all sorts of professions that require the professional to have a good bedside manner. Healing entrepreneurs come readily to mind – therapists and nutritionists and acupuncturists, for instance. These folks definitely need to have a calm, confident, easy way about them given the job they do. If they do, they will get more business than if they don’t.

 

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But the list of businesspeople that need to have a good ‘bedside manner’ does not stop there, in fact, it only just starts there. Let me suggest that almost every entrepreneur needs to have their own version of ‘bedside manner.’

 

For instance, an interior designer has to let potential clients understand that she knows something about color, design and furnishings that the client does not. She has to share this knowledge in a way that is inspiring, not sales-y, and makes the client to want to hire her, not be intimidated by her keen eye.

 

Or take a successful salesperson – he has to have a relaxed presentation style that lets customers know that he is as interested in helping them solve their problem as he is in making the sale, even though we all know he wants to make the sale. The best salespeople usually have a friendly, comfortable, positive manner that is more about getting to know the person than diving into the product or service at stake. They are the opposite of pushy.

 

What new customers want from you when they come into your business is something similar. They want to know that you are there to help them, not sell to them. The harder you try to sell them, the less they will want to buy.

 

Of course you want to acquire new customers, that is a given, but what I learned from David is that you only land that larger volume customer when you don’t scare them away.



About Steve Strauss

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 listen to his weekly podcast, Small Business Success, visit his new website TheSelfEmployed, and follow him on Twitter. © Steven D. Strauss.

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