Retirement planning is especially complicated for business owners. You have to fund your own retirement plan and decide what to do with your business before you retire.
[Read: 5 Ways to Save for Retirement When You’re Self-Employed.]
Many retiring business owners decide to sell the business. The proceeds from the sale can help to fund retirement. However, the process of selling a business can be practically difficult and also emotional. You’ve probably spent years or even decades building up your business, products or services. You may know your employees well and want to make sure they are cared for.
Here are six tips for getting ready to sell your business before you retire:
1. Get an appropriate valuation. First you should determine what your business is worth. This can take some time and sleuthing. You’ll want to start by taking stock of the assets and liabilities. Then look at your profit from recent years. You should also check out similar businesses in your niche to see what they might be selling for. It can be helpful to consult with an experienced professional before initiating a sale. Sometimes you’re not planning to sell your business, but a potential buyer comes along with an offer you can’t refuse. However, it’s still a good idea to double check that the offer lines up with the valuation of the company you built.
2. Create a succession plan. You don’t want to leave your business suddenly, especially if the goal is to keep things going for your employees and customers. Instead, take time to work with your buyer on a plan of succession. Introduce the buyer to your employees, business processes and customers. Show the buyer what it takes to keep your business running smoothly.
[Read: 5 Challenges of Early Retirement.]
3. Consider whether your children want to be involved. You might decide to hand over the reins of the business to a child or partner. You may still be involved on some level, but in a scaled-back way that lets you feel retired. However, your heirs might not want to run the business. Maybe you have aspirations of running a multi-generational business, but your children have other dreams. In that case it may be better to sell the business to an eager new owner rather than trying to force a poor fit.
4. 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, take a year or two before you sell to train employees to do some of this work.
5. Thank about your base of customers. As a business owner, you want to take care of your customers. So you’ll want them to continue to be served after you retire. Finding a good buyer to continue running your business is a good way to do this.
[Read: 11 Tips for Starting a Business in Retirement.]
6. Be ready for the emotional work. Many 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 into this business. You’re emotionally invested in your product. Maybe your business was born of an excellent product idea that you want to see continue. In this case, allowing for a buyer may mean you get to see your product grow and flourish.
When you sell a business, you’re stepping away from something that’s very important to you. Be ready to process the grief that can accompany this transition so that you can move on to enjoy your retirement years.
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Should You Sell Your Business Before You Retire? originally appeared on usnews.com
