Retirement is a process. It requires preparation for your finances, your relationships, and yourself. And if you're a business owner, there's the added step of deciding what to do next for your customers and employees.
“As soon as you start thinking about your own retirement, you should also start thinking about what's going to happen to your business,” says Paul Tramontano, executive managing director and wealth manager at Cresset Capital, a financial advisory firm that helps entrepreneurs.
“There are many options when considering whether to hand over the business to the next generation or sell it,” Tramontano says. “The sooner the better.”
Generally speaking, business owners have three options when preparing for retirement: find a successor, sell the business, or close the business.
1. Find a successor
If you want to hand your business over to a successor, “build a team early on that can take over the business,” says Keith Schiller, a former lawyer who specializes in business succession and now advises entrepreneurs at the business coaching organization SCORE.
You start a business with a partner and expect from the beginning that you will one day be running the business. Sales contract Clearly define the transition.
“If you have more than two partners or shareholders, you should be thinking about succession from day one,” Shiller says.
Or you can identify employees who are interested in running the business and have the ability to do it well. They can learn on the job and build relationships with customers and business partners, giving you confidence that the business is in good hands.
If there are subsequent heirs in the family, special consideration is required in the procedures.
Schiller recommends consulting not only with an accountant and banker, but also with a life insurance agent and an attorney with experience in business succession. You can also seek out a family dynamics consultant who can help you navigate the complex personal and financial issues that arise between family members during a business succession.
“I've seen families fall apart when a powerful principal owner dies,” Schiller says.
2. Sell your business
If you do not choose a successor yourself, you also have the option of selling the business to someone who will continue to run it.
“If a company has recurring revenue and cash flow, there's bound to be a buyer somewhere,” Tramontano said.
Tramontano said there are three categories of buyers of businesses: employee successors who already know the business and want to try their hand at running it, strategic buyers who can add the business to their portfolio and realize efficiencies, and competitors who can expand their foothold in the market.
“In general, strategic [buyer] “The companies that can pay the most are the ones that can get the synergies from operational efficiencies,” Tramontano says.
Business brokers, especially those who specialize in your field, We care about your businessWe find strategic buyers and negotiate the sale.
But a strategic buyer isn't always the right choice, especially if the buyer doesn't align with your company's values.
“Maybe you have an entrepreneur who's been contributing to the community for many years and they want to make sure that their business stays open and remains available to serve the community,” Tramontano said. “That really comes into the calculation.”
3. Shut down your business
Mr. Schiller retired and closed his law practice a few years ago. He couldn't find a successor, and potential buyers didn't seem like the right fit. “It was a control issue,” Mr. Schiller says, because he had a clear vision for the business.
Instead, Schiller spent his final years as a lawyer referring clients to other lawyers, then liquidated his practice after retirement.
To use this option in the future, you must first Retirement Plans for the Self-Employed You invest a portion of your income in it, and you can build up savings just like you would in an employer-sponsored retirement plan.
“Get started as early as possible,” Tramontano says. “The better your plan, the more options you'll have available to you.”
