Retirement is the carrot at the end of an incredibly long race that all small business owners are on, whether they like it or not. However, a recent survey of almost 2,000 small business owners revealed that almost a third of them have absolutely no plans for their retirement. Given the uncertainty facing the economy right now, that could be a significant oversight.
Of course, it’s easy for small business owners to find themselves distracted by the everyday minutiae of running a business, but it’s also important to make space and time to decide how you’re going to provide for your family and yourself after the dust has settled.
So, how should small business owners be planning for their retirement?
Succession – We might not want to think about it, but the business will go on without us and we obviously want to leave it in capable hands. That’s why it’s imperative to have a solid succession plan in place. Deciding who to relinquish control to when you step down is a major decision, of course, so it shouldn’t be taken lightly. Once you’ve decided though, talk with a lawyer to discuss the legal requirements for instigating a plan and let the lucky person (or people) be part of the process too.
Financial advice – Most financial advisors will tell you that it’s important to focus on your business’s growth, but it’s also just as important to focus on your personal financial wellbeing. Seek financial advice early on and you will be given long term advice on how and when to step aside from the business.
Plan your exit – If you are able to put a rough date on when you plan to retire then you’ll be able to more accurately plan your exit from the business and your entrance into retired life. Start approaching potential buyers or successors early on (at least 3 years before your planned retirement) and obtain a valuation of your business so you know roughly what to aim for and what to expect.
Diversify your savings – Many small business owners understandably believe that they should be able to cover their retirement with the profits made from selling their business. But this is a pretty naive idea. What if there is a downturn in the business or tragedy strikes? It might then be almost impossible to find a buyer for your business and your retirement plans will be ruined. That’s why it’s so important to always keep your options open!
Build your team – Of course, even a great plan is doomed to fail without a good team behind it. Surround yourself with professionals who can help you plan for the next step and you’ll be that much more likely to enter retirement successfully.