After years or even decades of time invested in your business, maybe you're ready to retire. Maybe your business and personal goals changed and you want to launch something new. Maybe you're part of the group of Americans who decided that life has more to offer than work after a year of pandemic.
Whatever your reasoning, there is still the lingering matter of your business. If you have employees, what will happen to them? What about your clients or customers?
This is where you need a business transition strategy. If you've never thought about transitioning out of business, keep reading for five tips for a successful transition.
1. Pick a Strategy
There are three main strategies you can use for a business transition.
The first is a straight sale to a third-party buyer. The second is an employee stock ownership plan. The last is a transfer of ownership to a family member or key employee.
The strategy that makes the most sense will vary based on your business. Businesses that depend heavily on owner relationships or personality typically require a transfer of ownership. Businesses that can run without that key personality are often candidates for direct sales or ESOP.
2. Get a Valuation
Regardless of your strategy, you need a valuation before selling a business. Your own emotional investment in the business can skew your sense of its value.
A valuation gives you an accurate picture of your company's worth. That, in turn, helps you in negotiations with potential buyers. Alternatively, it gives you a starting point for selling to a family member or employee.
3. Succession Planning
Let's say you'll sell to a family member or employee. Before you start worrying about retirement plans for business owners, you must consider your succession planning.
Minimally, you must spend some time mentoring the new owner and giving them increasing responsibility. This prepares all of your employees for the transition.
4. Consider a Business Broker
A lot more business sales fail than succeed. If you decide that selling to a third party makes the most sense, consider using a business broker. A broker understands the ins and outs of the process and can help shepherd a successful sale.
5. Ensure Your Personal Finances Are in Order
If retirement is your goal, meet with your personal financial advisor before you broach the subject of transitioning out to anyone else. Make sure that your retirement finances are where you need them to support your entire retirement.
Business Transition and You
A successful business transition leaves you in the position you want, whether that's retirement or free to pursue other ventures. Making that happen takes planning and time. Assume that your transition will take anywhere from two to five years, depending on the strategy you select.
Above all, though, makes sure your personal finances are in order to support you after you transition out.
The Financial Center for Women specializes in retirement planning for women and financial planning for business owners. If you want to make sure your financial affairs are in order before your business transition, contact us today.