Ready to retire from your small business?
Chris Judd has had to make an early exit from his career, and whilst many people would love to retire in their early thirties, it isn’t always a possibility. It comes after a large number of baby boomers have begun to retire, leaving their businesses without a proper strategy laid out. And whilst Judd’s retirement came as a bit of a shock to the AFL community at large, most of us need to spend years planning for retirement, trying to figure out what is going to be best for our business and ourselves in the long run.
If you’re a business owner, you’ve been in charge of your retirement plan since day one, and it’s likely that your business is also your biggest asset. For you to retire, you need to make sure your business is ready to be let go. It takes a lot of preparation to make sure you start your retirement on the right foot, so if you’ve got plans to retire in the next few years, its best to get started on your planning now.
It’s never too early to start planning. The day you start your business should be the day you start planning to leave it. No one lives forever, and there is almost always an inevitable end point to your working life, so you need to make sure your business is going to be able to run without you there to take the reins. If you haven’t been planning your retirement for a while, you might need to hold off on it. Experts recommend you work on your succession plan for ten years before you retire, to make sure your business is in the best shape to be let go.
Remember to keep your options open. As a business owner, you’re not restricted to simply saying farewell to your working career, and the way you choose to retire will speak a lot towards how you actually get to spend that retirement. When you’re planning to move on from full time work, think about who you want to see your business go to. Consider family members, third parties, and employees when you’re trying to sell. Do you want to keep the business in the family? Your children might be interested in taking over. Aiming to keep the company’s vision the same it was when you started up? A long-term employee is likely to have the same interests and visions as you do, and they’ll already know how the company works. Looking to move away from the business completely? A third-party option is your best bet, but you have to be wary of their intentions and give yourself time to negotiate. In every case, it’s best to call in a professional advisor to help you make your decision.
You don’t have to walk away completely. For those who have made their business their life, walking away from a lifetime of work is almost impossible. Plenty of small-business owners might want to work until they are literally physically incapable of continuing on, but if you do want to keep some say in the business, looking to sell to a family member or employee is your best chance. That way, they’re far more likely to take what you have to say on board, and you can divide your time between leisure and work.
Give yourself (and your business) time. Creating a succession plan takes time, particularly if you’re selling to someone whose vision might not entirely match your own. Make sure you’re giving your business enough time to adapt to the new vision, to ensure the best possible outcome for your sale and for the business’ future. Even if you are stepping away entirely, after investing so much time and energy into your company, it’s likely you’ll always want what is best for it.
Start sprucing early. When it does come time to sell, no matter who you’re selling it to, you’ll want to make sure your business is as appealing as possible. If your financials are a mess, it’s going to be hard to sell regardless of your target buyer, and it will also make for an unhappy retirement for you. Eliminate extra expenses and any extraneous inventory to try and maximise your cash flow, and make sure you have all the financial information a buyer might be interested in on hand. This includes any important information about loans taken out on behalf of the business, particularly if you won’t be able to pay them off in time for your retirement. It’s important that your buyer gets all the information they need before you have closed the deal, to make sure you both end up happy with the business’ future.
Remember, at the end of the day, your business is your retirement fund. You want to see it go into the right hands, but you also want to make sure you have enough money and peace of mind to enjoy your hard-earned retirement with. Not all of us are as financially ready to retire at the drop of a hat like Chris Judd, but if you start now, you can take a step in the right direction to retiring when it is right for you.