Retirement planning: Are you prepared to walk away from your small business?(Read article summary)
Retirement requires a lot more planning for small business owners than for traditional employees. Are you truly prepared to walk away?
Walt Unks/Winston-Salem Journal/AP/File
It’s tax season, and as a business owner, you have quite a few documents to submit to your accountant. As you gather receipts and sales records and assess your inventory, you may be thinking about how much longer you will be doing this.
With all of the tax laws and regulations and the paperwork necessary to comply with them, running a business can certainly feel overwhelming at tax time — as well as during the other stressful times of the year!
That brings us to a few questions to consider. Are you ready for the time when you can walk away from your business? Are you prepared? Can you live the rest of your life off what you have accumulated?
Will there be enough for you and your family without having to go back to work? What tax issues will you confront when you sell, and how much will you have to pay Uncle Sam? These are all valid concerns for small-business owners.
Here’s a strategy for addressing them:
1. Your ongoing priority should be maximizing your return from the sale of your business
Ask yourself what kind of sale it will be:
- Installment plan
- Buy-in over time
- Buy/sell agreement
- Stock sale
- Combination of options
Think about these ahead of time, and you can plan accordingly for what is to come. Make sure your equipment and the building itself are properly maintained. These tangible assets will help determine the company’s ultimate value. Also, pay attention to how the “ship” runs without you. Have you put in place the necessary succession plan for you to be able to walk away and still have the business thrive?
2. Know what your business is worth from a valuation and evaluation perspective
Good advice will tell you what your business is worth and what you will get if you sell. Great advice will tell you how to get the most money possible out of the deal. You should be paying attention to what your business is worth from day one. If you own a business and are not sure of the worth, there are companies that can help you with a valuation.
We have found that the folks who have the most success are the ones who regularly evaluate their overall business and obtain proper valuations. One pretty neat way to get the ball rolling is to check out Ed Pratesi’s free online “Sellability Score” tool at Brentmore Advisors.
3. Get yourself to a place where you can enjoy true success
This is what it all boils down to. Money is a means to an end, not the end itself. A qualified financial adviser can help you with different strategies to get the most money back with the least amount of hassle.
True success means having a great lifestyle — and making sure you have enough money and time to enjoy it.
Learn more about Brian on NerdWallet’s Ask an Advisor.