When business is going well, it’s hard to think about the end of the line. At some point, thoughts of retirement must cross your mind. It is wise to begin a plan to step away from the organization and enjoy the fruits of your labor. That step may not always be easy. Like most business owners, most of your assets are likely wrapped up in the business. Plan early and find a sound exit strategy that will help you maintain your lifestyle. Consider one of these concepts to help turn business assets into cash or an income stream to live on after you retire.
One of the primary concerns about retirement is purely financial. Will you have enough to walk away? If your business turns consistent profits and has grown sufficiently, it may be an attractive target for a purchase. While it may be difficult to leave your livelihood behind, the money reaped from a sale may be the principal component to fund your retirement. However, there is much to consider before putting the place on the block. You must strike while the iron is hot; don’t sell out of desperation or because you’ve had a bad year. Explore sales options when your own sales are booming. One valuation method for a small business involves a multiple of revenue, so a prudent approach is selling in the midst of successful years. To negotiate the best price and beef up your retirement nest egg, do everything possible to enhance the value of the business. Drive growth. Cut expenses. Streamline operations so that a potential buyer only needs to come in and turn the proverbial key.
You don’t have to go it alone. Examine the possibility of hiring a small business valuation expert who can give you a good idea of what your organization is worth. The estimates these professionals provide are objective and closer to market price than your own figure. Often, many business owners inject an emotional premium into their own valuations, inflating real worth and scaring off potential buyers. If you’re serious about retiring, arriving at fair market value will help convert your life’s work into cash, so you can ease the financial burden of hanging it up.
There’s a way to step back, not away, from your business and create retirement income. If you have children or other relatives with a working interest in the business, and if they are onsite daily and express interest in continuation, a succession plan may work well. Their willingness to fill your shoes while you stay on as a consultant may facilitate a seamless transition.
You can get creative with the financing. Consider a partial sale that generates a lump sum, while you negotiate an income in exchange for your guidance and expertise. At some point, you can cut the cord completely, knowing that your venture is in good hands.