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Simple Steps for Selling Your Business and Retiring in Style

Posted by : Mala Lal | Posted on : Wednesday, October 21, 2015


Retiring takes planning and being able to sail off into the sunset and enjoy a comfortable retirement is not something you can achieve easily in just a few years.

If you own a business and want to capitalize on the value that you have built up over the years and get a decent price that allows you to fulfill your retirement dreams, a strategy needs to be in place.

There are specialists around that can help you work out the best way to get the most out of your money such as Verdure Financial Planning and others like them, and there are also some strategies that you can put into place which should improve your odds of enjoying a comfortable retirement.

Setting a goal works best

We would all like to have enough money in retirement to feel comfortable but to actually accomplish this aim, it works better when you set goals for your business as well as your retirement plans.

Setting a specific goal for your business and identifying exactly what you would like to do at retirement is a key point in your action plan.

In the same way that you have a business plan for the next few years and sales targets that you want to meet, you should also aim to have a long-term strategy for selling the business, which gives you a goal to aim for.

Try to envisage how you see the most likely exit from your business when the time comes to retire.

If you have an idea that you want to build the value up as high as possible before offering the business for sale as a going concern on the open market, or perhaps intend to pass the baton to a family member, knowing how you intend to exit will help in your financial planning.

Cash now and cash later

The problem that many of us face is that as much as we want to put as much cash away as possible for our retirement, we also need cash now for living and to invest back into the business so that it can grow.

The problem becomes more compounded the longer you leave it to start planning for your retirement.

If you start your business in your mid-twenties for example you will probably not have to be as aggressive with your savings to get where you want to be, than if you start your plan in your mid-forties.

Putting all of your profits back into your business will probably result in some level of shortfall in your savings target when the retirement date comes around. It is a bit of a balancing act between cash now and cash later, but you may also be able to use tax advantages with your contributions to a 401(k).

Take professional advice on tax planning and retirement planning if you can, as this will often allow you to get your money to work smarter and also help you to work out how much cash you need now and how much to put away for later.

Add value

Working out how much money you need for retirement obviously hinges on how much you can generate from your business and its subsequent sale price.

A smart strategy for maximizing your potential final sale price is to add value and create a business that becomes more attractive to buyers, so that they are prepared to pay top dollar. Increasing the value of your business often means adding staff, as one-man businesses often tend to struggle to meet their true worth.

The general view is that buying a proprietorship is more akin to buying a job rather than buying a business, whereas if you have a firm which has at least three employees, buyers can see that there is something more tangible to work with and they will probably believe that there is more opportunity to develop and grow once they take the reins.

Adding employees and attempting to grow revenue organically should often allow you to command somewhere between 50 and 70% of the value of your assets in a buy-out situation and roughly 3 or 4 times the annual revenue as a sales price.

Exiting the business

When you transfer ownership of your business you might be able to achieve an outright sale or you have to negotiate a gradual exit.

A gradual sale often helps both parties as the buyer gets a chance to learn the workings of the business under the existing owner and finally paying over the agreed sale figure and the seller negotiates an initial payment followed by a possibly a monthly income until the agreed time comes to hand over completely.

However you decide to exit and start your retirement, those plans to put your feet up need to be planned years in advance.

Katriel Warlow-Shill has more than 24 years experience and accounting and tax, and 12 years as a specialist financial planner. Katriel is focused on personal relationships and the individual goals and objectives of his clients.

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