One of the more interesting facts that a recent survey of family businesses uncovered was that over half of the businesses polled had multiple family members with an ownership stake in the business, but that didn’t actively work in the business. Additionally, it showed that two-thirds of business owners counted on the value of their business to fund their retirement. Thusly, if a business succession plan fails, or there isn’t proper planning to maximize the sale price of the business, the retirement nest egg of the business owner certainly appears to be in danger.
In order to confront the risks outlined above, if you are a business owner you need to begin formulating an exit or succession strategy as early as possible. Whether the business can be turned over to a family member, key employees, or if the business will have to be sold, are key determinants in your financial future.
Start now by working with your financial advisor to determine how much money you will need to fund the lifestyle that you desire during retirement. Consult with a business broker or valuation consultant to determine a likely sales price for your business and keep track of this number as time passes and conditions change. You should also be aware of the tax liabilities and legal obligations in a sale by conferring with your respective accountant and attorney. In short, use every resource available before retirement to help you assess the strengths and weaknesses in your plan and take every step possible to maximize the profitability of your business.
As you can see, exiting your business successfully will require preparation and forethought. Hopefully, though, with proper planning, and a good team of advisors, a favorable outcome can be achieved on all fronts and help ensure that you enjoy retirement to the fullest extent possible. Conversely, inadequate planning may cause the valuation of your business to be far less than what it could have been or in the worst case, inhibit an exit altogether.