Small-business owners frequently finance part of their retirement by selling their companies; however, retirement planning is especially complicated for business owners. Not only do you have to fund your own retirement plan, but you must also decide what to do with your business before you retire.
Most retiring business owners decide to sell their business. And why not? You’ve probably spent years or even decades building up your business, products or services. The proceeds from the sale can help to fund retirement. However, the process of selling a business can be difficult if you don’t enlist the right professionals to help. Planning is the key to making sure that you not only get the funds you need out of the sale but that your business and your legacy survive long after you take your closing check to the bank.
Here are 5 tips for getting ready to sell your business before you retire:
1. Get an appropriate valuation.
First, you need to determine what your business is worth.
It can be helpful to consult with an experienced professional well before you are ready to sell. A business broker will be able to give you their opinion of market value, based on all of the numbers you provide to them. They will also be able to help you with the complete sale of your business when the time is right.
2. Create a succession plan.
If your goal is to keep your business going for your employees and customers, then you will want to carefully prepare your business for the transition to a new owner. Take the time to work with your buyer on a plan of succession.
Once the sale of the business is complete, you should plan to stay on for a few weeks of handover, so that you can introduce the buyer to your employees, business processes, and customers. Show the buyer what it takes to keep your business running smoothly. Having a rock-solid succession plan can maximize the potential for a successful sale, while also giving you peace of mind.
3. Train your employees.
Having well-trained employees, especially at the management levels, will make your business easier to sell and help ensure that things stay on track as much as possible. If you’ve been doing most of the management on your own, a year or two before you sell, train employees to do some of this work.
Having a competent second-in-command will also help make your business more attractive to buyers. They’ll have a point person they can go to who’s well trained because you’ve taught them leadership and instilled all the policies and procedures. This is also very helpful to have if you need to step away from the business for any reason as well. You want to get the business to run smoothly without you. Automate as many processes as you can, such as billing and customer communication, and make sure all your employees are on the same page.
4. Be ready to let go.
Some people find that retiring is more emotionally difficult than they thought it would be. This may be even more true of business owners. You’ve invested a lot of yourself in this business. You’re emotionally invested in your product. Maybe your business was born of an excellent idea or service that you want to see continue. In this case, finding a great buyer may mean that you get to see your business continue to grow and flourish.
When you sell a business, you’re stepping away from something that’s very important to you.
5. Plan for your future freedom.
Once you retire and sell your business, what do you want to do with your time? Will you travel? Visit friends and family? Spend more time with your loved ones? Imagine spending your afternoons on the golf course or on the beach, rather than in the office. Planning for this freedom should be fun and exciting. After all, it’s what you’ve worked so hard all of your life for. Explore all of the different ways that you could fill your days. It will make the daunting thought of selling your business much more exciting.
If you are planning for retirement in the next few years or sooner, we can help with the sale of your business. The earlier you get us involved, the more we can help you get your business prepared for sale in advance. Contact us today.