By John Drachman
If selling your business is a cornerstone for your retirement plan, you won’t be alone.
When 12 million retirement-minded boomer business owners put up their businesses for sale back in 2013, they flooded the market. After five years, only 25% of those companies were sold for the asking price. Most then faced a choice: either accept the offer for less money or shut down the operation and find some kind of employment.
Meanwhile, some one-person business owners were finding themselves in a pickle familiar to legions of senior boomers. The Insured Retirement Institute has described this cohort’s focus on including some combination of expense reduction and part-time employment to their retirement picture. “The longer you live the greater the potential impact of retirement risks like inflation, excessive withdrawals and health care costs on retirement income,” notes Mass Mutual Blog’s Allen Wastler.
While counting on a business sale to fund a leisurely retirement can still be a big plus, there are several boxes to check before making the decision to sell.
- Think like the entrepreneur you are: Unlike most 65-year-olds with lengthy corporate tenures and hefty 401(k)s many business owners can’t count on retiring by the clock. Since your company’s value will continue to fluctuate until you sell it, you’ll want keep an even closer eye on the markets and your industry to optimize the value of the firm’s assets.
- Pace yourself: In some cases, it can make more sense to sell the organization’s assets over time than all at once. Building a transition strategy is important for your employees too. This will help them plan for their own futures – while still supporting your strategy.
- Enlist a family member: For some, bringing a family member into the business can provide control and time to develop a sales strategy – but not necessarily execute it. Depending on the terms, you might even be able to craft an arrangement that generates some regular income in exchange for providing some part-time consulting services.
- Balance patience with decisiveness: Wait for the moment when selling conditions appear most favorable. If you’ve laid out your strategy in advance of the sale, you’ll have improved the chances of seizing the marketplace advantage in pursuit of your asking price.
- Assemble a “brain trust:” The most successful business owners view their retirement as another kind of business. You’ll need mentors as well as a team of trusted advisors, a “brain trust,” to help you craft and guide a selling strategy to success.
Are you getting ready to retire? Now is the time to consider whether you’ll be able to sell the business and net the funds you need. Realism will be critical in gauging the tax implications of the sale as well as determining how much the business is really worth. Your efforts can be made easier by consulting with a financial advisor or business broker to map out the best route to reaching your retirement goals.
John Drachman is a contributing writer to www.myperfectfinancialadvisor.com, the premier matchmaker between investors and advisors. John is an IABC award-winning writer, who applies his 30 years of financial marketing experience toward advancing the dialog between investors and investment professionals.