As an entrepreneur, you’ve probably been so busy building, nurturing, and growing your business, that you haven’t had any time to think about your own retirement. That time has finally come: It will probably take several years to plan the successful sale of your small business, so it’s a good idea to get started now by putting together your succession plan.
Here are 5 things to consider that will help you get started in the planning process:
1. What are your goals?
Take some time to focus on yourself, your family, and friends. What are you retiring to? How do you want to spend your new free time and who do you want to spend it with? What are your favorite hobbies or interests? Where do you want to live? What type of lifestyle do you envision? Do you enjoy more active, outdoor activities, or more quiet, indoor activities? Do you prefer the country or the city… or somewhere in between?
2. How will you transition into retirement?
Have you mapped out your exit game plan? What does it look like? Will you transition slowly by going from full-time work to part-time? Are you planning a multi-year separation plan and a gradual stair-step exit? Do you want to stay involved or completely remove yourself from the business? Do you have a timeline that maps out your business transition plan? Who will take care of your clients or customers?
3. Do you have a succession plan for your practice or business?
What does your business exit strategy look like? Do you have a consultant or broker that you are working with to help you sell your business? Does the broker understand your unique specialization and the true value of your business? Does your practice or business have a marketable value? If it does, would you sell your business to an outside party? Would you hire and train a successor from outside the practice, or sell your business to a family member or current business associate? Have you had a recent professional valuation of your small business? Have you put together a step-by-step marketing plan? What will you do with the monies from the sale of your business?
4. How is your business set up, and how will you structure the sale of your practice or business?
Is your business operating as a Limited Liability Corporation (LLC), S-Corp, or C-Corp? Do you have other shareholders and employment agreements to consider? How will the sale of your business affect your taxes?
It will be important to assemble a solid team of professionals to help you during this process. Possible team members may include the following an accountant, a contract & estate attorney, a wealth manager, a pension administrator, a valuation professional, and a commercial insurance specialist.
5. Are your financials and client files up to date?
It’s time to clean up and catch up. Make sure your financial files are in good order by updating your records, sales, and transactions. Do you have a good handle on your cash flow? How much time do you spend running your business? How many hours per week do you work? How many people would you have to hire to replace yourself? Do you have a good client data base? Is it up to date with all your current contact information? How and when will you communicate your succession plan to your clients? How are you taking the payout from the new owner, and where is it going when you receive it? How are you going to structure it so that it creates cash flow in retirement?
Finally, it’s easy to get wrapped up in the business details and forget to focus on the personal details of this big life change. Take some time during this process to circle back to your personal goals and dreams, and work with your wealth manager to update your retirement plan. You can do some of those things you always wanted to do. That may include volunteering with a local charity, traveling, reading books, and visiting children (and grandchildren). Maybe your goal is to establish a non-profit and use your business and professional knowledge to help others. Wherever your path takes you, it’s yours to enjoy.