What Are the Options for Your Business When You’re Thinking About Retiring?
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Many business owners have spent the majority of their whole life working on their business and making it the success it is today. This has allowed them to live the life that they have worked so hard to create, as it has been their primary source of income. However, no business owner (or anyone else for that matter) can work forever and plans for retirement must be made well in advance. These plans consist of long-term planning that will help ease the business owner into a comfortable retirement.
Have An Exit Plan
Planning for retirement involves knowing what you are going to do with your business once you have decided that you are ready to move on from it. One way or another, that chapter is going to close in your life, whether it is by retirement, selling it or passing it on to an heir. However, succession planning should start five to ten years prior to the time the business owner is planning on retiring. Below is a closer look at this type of planning and what it involves.
The Importance Of Succession Planning
Smaller businesses that are mostly family have a low percentage of surviving from one generation to the next because of inadequate succession planning. A family business that wants to survive for generations to come will strongly benefit from a good succession plan done by a private equity expertise company. Without the plan, a business may be sold or merged, but can also result in family quarrels, damage to the business, damage to family relationships, power struggles within the family and so much more.
The Process Of Succession Planning
Succession planning is customized to fit each client’s personal needs, however, certain areas are always covered in every plan that is made for a business owner. These areas include: designating subordinate roles, dividing responsibilities, carving out career paths, assigning ownership percentages, contingencies for an unforeseen death and any emotional issues regarding a family succession. Hiring a professional company to assist with such needs will set a company up for success for many more years to come.
Deciding To Sell The Company
Many business owners do not have family members they would like to pass down their business to, and in that situation, they may decide to sell their company in order to fund their retirement plan. It is said that 78 percent of small business owners plan on selling their company in order to fund the majority, if not all, of their retirement years. If the decision to sell is the right one, then a little bit of research is needed to find out the worth of the company by looking at the assets, liabilities and the profits in recent years. Also, it is a good idea to take a look at other businesses that are similar to yours to see what they are selling for, as this will give you an idea of what you can expect to get for your company
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An Option For Those That Don’t Want To Sell Their Company
Many business owners fear that the sale of their company will not fully fund their future and everything they had planned to do in retirement. Some don’t want to sell their company because they will miss working and don’t know what to do with all that free time they will have. Luckily for those people, there is the option of a half-retirement. This plan allows the business owner to still run the company, but they will not need to invest so many hours there doing so. Below is a closer look at how this can be accomplished.
The Various Aspects Of A Half-Retirement
Such a plan takes about a year to effectively put it in place, but the benefits are worth the work it needs to properly get the plan off the ground. When done well, a half-retirement will allow the individual to retain their current income, work much less doing the work that they enjoy and they will be able to retain their current employees. A half-retirement can be accomplished by shifting more work to the team, shifting the company from an owner-driven status to more of an employee-driven one, choose a good second in command, strengthen all systems so that they run the company, create financial controls to protect your income and enjoy everything a half-retirement has to offer.
Having An Heir Run The Business
In a perfect world, a son or daughter usually takes after in their parent’s footsteps regarding the company they worked hard to build. In such situations, the business owner can be proud that their child or children took over the family business and are running it in the same manner that they once did. This way, the business owner can rest assured that their company is still in good hands, is still successful and all the employees were able to keep their jobs. Fortunately, this situation does occur quite often and the business owner does stay on board in some way and does have a little bit of input when needed.
Consider All Options Before Making A Decision
Owning a business is a great adventure to have for the majority of one’s life. However, as with everything else, all things must come to an end. Planning for retirement should happen a few years before it is to occur so that everything is put into place and all necessary paperwork are completed, filled out and filed properly. As mentioned above, there are various options to choose from when it comes to one’s retirement. Because of this, it is important to take one’s time and to really think about each option to determine which one will be best.
Many people look forward to retirement because it is a time to relax and to do the things that they have not been able to do in previous years for one reason or another. Retirement has a different meaning from one person to the next and it is up to each person to decide what that is so they can act on it.
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