Being a small business owner has many benefits, such as being your own boss, making your own schedule, and hopefully, generating a comfortable income. You’ve built a business that has endured based on tips from experts and business advisors, but the time has come to decide what to do with your business when you are ready to retire. Here are some strategies to help you prepare your lifestyle and business for retirement.
1. Open a Retirement Account
Long before you consider the retirement stage, it’s important to take steps so ensuring you’ll have an income once you are no longer working. As soon as you can, open your own retirement account. For small business owners, that may look like an independent IRA, or Individual Retirement Account. There is also the option of opening a solo 401(k) account.
2. Get Your Business Appraised
Another step you should take when you are thinking of retirement is to get your business appraised. Consult an expert to see exactly how much your business is worth. Take into consideration the assets that come along with your business and your company debts. Throughout the life of your company, you should get periodic valuations to help you make the best decisions.
3. Create a Will
It’s vital to create a will for yourself as a small business owner. Whether you have a family or not, it’s important to take this necessary precaution to prepare in case something happens to you before retirement. Draw up specific instructions about what would happen to your business and it’s assets.. That way, you can ensure that your family, your employees, and your legacy are well taken care of.
4. Make a Retirement Plan
The next step to take is to start planning out your retirement strategy. Depending on the nature of your business and your health as you age, you may be able to run your business well into old age. If your health starts to deteriorate, or if your business is physically demanding, you may need to revise your exit strategy.
5. Sell Your Business
You then need to consider the options about what to do with your business once you no longer are involved. One possibility is to sell your business. If your business is viable and generating a profit, you could exit along with a sizeable cash sum to help you ease yourself into retirement. Some business owners are able to sell their companies to top employees to keep the company mission going. It’s important to consult with a business advisor to help guide you through the process.
6. Transfer Your Business to Family
If you want to keep your company within your family, one option to consider is simply transferring ownership to a family member. Once your children are ready to start working, you want to recruit them as employees to help them learn your business. Then, when it’s time for you to retire, you can feel more at ease if your child takes the reins. If you don’t have children or your kids aren’t interested, begin grooming another interested family member early.
7. Prepare for a Buyout
The next way you can get out of your business for retirement with some cash in hand is through a buyout. If your competition is interested in expanding, you may be able to approach them when you’re thinking about retiring. Sometimes, you can get purchased by a larger corporation and gain a substantial amount of cash.
8. Close Your Business
Finally, some small business owners aren’t able to sell if their company isn’t profitable. In this situation, you may need to simply close the business. You can liquidate everything to help satisfy debts and make arrangements, so you’re not left with a heavy financial burden during your retirement. In this scenario, you may actually end up losing money, so this is typically a last resort.
When you start a small business, it’s important to consider your exit strategy as well. That way, you can see a viable way for you and your family to enjoy the retirement years. You and your spouse can gracefully leave the business and stop worrying about all of the daily stresses and headaches for once.