Owning a small business is one of the most difficult and rewarding things a person can do. For most small-business owners, their wealth is tied to their business, which can make retiring a difficult process. Retirement may be dependent on selling the business or transitioning it to a partner or family member.
That process can be complicated and time-consuming, and it can also require extensive planning. If you’re a small-business owner who’s thinking about retirement and succession, below are a few good starter questions to begin the planning process:
What is your end goal?
Before you start thinking about your future and the future of your business, you should have an end goal in mind. After all, it is difficult to create any plan without knowing the desired outcome. Think about all the options. Do you want out completely, or do you want to remain involved? Do you want the business to stay in the family, or are you open to outside buyers? When do you want to retire?
These are all examples of questions you should think about. This doesn’t need to be a difficult process, either. Simply thinking about and documenting your vision for your business and your retirement can help you find clarity on your end goal.
How much money do you need from the business transition?
It might be hard to determine exactly how much income you will need in retirement. You may find it helpful to develop a retirement budget and income projection plan to determine your needs. Those documents can help you identify how close you are to reaching your retirement goals and where you can make improvements.
There are some things to consider as you determine your retirement budget. For instance, do you have outside sources of funding such as IRAs or 401(k) plans? Do you need your compensation in a lump sum, or can you be flexible and allow the new owner to make payments to you over the years?
Knowing exactly how much you need for retirement can make it easier when you negotiate a sale and transition your business.
How will you communicate your plans?
As a small-business owner, you probably know a lot of people who have a vested interest in your success. That’s why it is vital you communicate your plans to employees, customers, vendors, partners and family. A lot of tension and confusion can be alleviated simply by having a good communication plan.
That doesn’t mean you need to share every detail of the process. However, your partners, family and employees should know that a transition may be imminent, and they should have some guidance on how that transition will impact their lives and their jobs.
Ready to learn more about selling or transitioning your business? Contact us at Intelliplan Financial. We can help you evaluate your objectives and needs, and then develop a strategy. Let’s connect soon and start the conversation.
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