Succession Planning Steps

 

If you are a business owner and you’re thinking of retiring, you need to understand that the foundation of an accurate retirement plan starts by seeking the answer to 4 simple questions.

If you want to sell your business and have a comfortable retirement you need to seek the answer to 4 questions:

  1. How much is my business worth today?
  2. If I sold my business today for the amount noted in question #1, how much will I actually pocket?
  3. If I sold my business today, how long would I reasonably be expected to stay on with the business, after its sold? and
  4. How might the answers to questions 1, 2 and 3 change if I kept my business for a year or two, and used that time to properly prepare it for a sale?

Let’s discuss each of those questions in more detail:

 

How much is my business worth today?

In order to understand the true market value of your business, you must hire someone who has hands on experience buying and selling small businesses – which by definition are firms that have fewer than 100 employees. Someone who can complete a thorough review and valuation of your business.

While this individual might be a business broker or business advisor it is important that this individual also comment on:

What elements of your business are contributing its value, and

What elements of your business are not contributing to the value.

More on why that’s important, in a moment.

 

If I sold my business today for the amount noted in question #1, how much money would I actually pocket?

In order to determine this, you need to be sure your accountant is proficient in understanding and implementing tax mitigating strategies as it relates to selling a business. Don’t settle for any quick answers here, you need to ensure you qualify for such things your Lifetime Capital Gains Exemption.

 

If I sold my business today, how long would I reasonably be expected to stay on with the business, after its sale?

Few business owners realize that they will likely be required to stay on and help the new owner of their business, after the business has sold. Generally speaking, if you have not put the time and effort into preparing yourself or your business for the sale, you’ll be staying on after the sale, for a lot longer than you think. For a small business, this might be 6 months to 2 years. For a medium-sized complex business, this might be 3 to 5 years. 

Again, the business broker completing the thorough review and valuation of your business, will be able to provide you with a more accurate estimate based on the current condition of your business and market conditions.

 

How might the answers to questions 1, 2 and 3 change if I kept my business for a year or two, taking that time to properly prepare it for a sale?

From business owners to so called advisors alike, many fail to ask this simple question.

Again a thorough review and valuation of a business will show the advantages of keeping that business for a year or two – taking the time to properly polish and prepare that business for a sale.

 

Let’s summarize the discussion.

As a business owner, before you can plan your retirement, you need to seek the answer to 4 questions:

  1. How much is my business worth today?
  2. If I sold my business today, for the amount noted in question 1, how much money would I actually pocket?
  3. If I sold my business today, how long would I reasonably be expected to stay on with the business, after its sale?
  4. How might the answers to questions 1, 2 and 3 change if I kept my business for a year or two, taking that time to properly prepare it for a sale?

Knowing the answer to each of these questions will determine what path you have to take, and how long it will take for you to fully immerse yourself in your retirement plans.

Critical information that is the foundation of enjoying a wonderful retirement.

 

Thank you for taking the time to read my article on Retirement Plans For Business Owners!

If you enjoyed reading this article and found it helpful and informative, please do take a moment to Comment & Share! Doing so really will help me get my message out to other people just like you, who are searching for such expert advice.

 

 

 

0 Comments

Submit a Comment

Your email address will not be published. Required fields are marked *