There comes a time in the life of every entrepreneur when they leave their business and retire. Whether you are retiring for your grandchildren, for health reasons, or simply want to enjoy life, choice, and timing, they are different for everyone and it is important to be prepared. Separating yourself from your business both personally and financially is a complicated process.
If you're ready to sell your business and retire, there are a few things you need to do before starting your golden years.
Ready to sell your business and retire?
Often times, it is difficult to know when to withdraw.
In a recent Gallup poll, researchers found that the average retirement age in the United States is 62. Gallup notes that this is the highest median age, since the polls began in 1991 when the median retirement age was 57. One reason for the trend nationwide is the economic downturn effects of the Great Recession. For example, during the Great Recession, the nation's 401 (k) and IRAs lost $ 2.4 trillion combined. Many people are still trying to recover their lost savings.
Another reason for delaying retirement is that the average useful life is increasing. Americans are working harder to save more. A large part of the calculation depends on your financial planning. Can your monthly payments offset your lifestyle? Do you have dependents that you will need to support in your pension, social security checks, or retirement account? Do you qualify for social security in your country?
Determine what your business is worth
As part of calculating whether you can retire in the near future, the next step is to determine how much your business is worth if you decide to sell it. Therefore, you need to make a formal assessment of it, which will help you prepare your exit strategy along with a timetable for it.
- Formal Valuation
This will provide you with the most likely selling price for your business. Contact a business advisor, such as Sunbelt, for a formal assessment. Advisors will use historical data, income statements, tax returns, personnel records, and more to prepare the formal valuation of your business. This information is vitally important for interacting with potential buyers. A well-organized company with detailed financial records and qualified personnel represents an attractive investment opportunity.
You must obtain a formal business appraisal before making any other decisions. Owners can sometimes be biased in determining the value of their business and are surprised when the valuation is lower than they expected. If your valuation shows that a sale at this time cannot fully fund your retirement, there are things you can do to increase the value of your business. Strategies like expanding your customer base or having a strong management team are ways to get a higher price.
- Exit strategies
Depending on your needs and / or desires, there are a variety of ways out of your company and your role as an active executive.
Close and liquidate: The business will cease to exist and all assets will be liquidated.
Selling to a third party: Traditionally the most common way to get value from your business.
Get acquired: The largest companies in your industry would absorb your business.
Deciding on your exit strategy will help you determine your schedule.
Schedule
Your retirement schedule is based on your final planning steps, your assessment, and the exit strategy you hope to use. Use your business advisor to determine what your individual timeline will be for selling your business and retiring.
Plan your future
It's important to plan for your future both financially and emotionally for retirement, no matter what line of work you are in. But as an entrepreneur, walking away from a company in which you've invested most of your life can be especially difficult. Consider what you will leave behind before you sell your business and retire: your daily routine, a way of life, and your coworkers and friends.
Facing an uncertain future will make the decision even more difficult, so plan ahead. Maybe there were hobbies and activities you never had time for or places you always wanted to visit. Stay busy by signing up for classes, volunteering in the community, or committing to a new project.
Retirement can cause unease or excitement, depending on your situation. If you need help determining when to sell your business and retire, contact Sunbelt Business Advisors. At Sunbelt Centroamerica we have a tool (Pre Score) that can help you if you are evaluating your retirement.
Contact us for a free evaluation.
Source: Sunbelt Business Brokers