Do business owners retire?
December 21, 2019
Business owners think differently about retirement. To many of them, it's something other people do, not them.
Think about it. Most business owners have dedicated a significant portion of their life to their enterprise. It's a part of them. So, talking about retiring can feel like quitting, giving up. Even those who decide to sell are often very discriminating about whom they will let take over their "baby." They want someone who will love and nurture it as much as they have, and this often proves difficult when considering letting go.
The reality is that all business owners will leave one day. Whether they sell, pass it on to the next generation or die during the course of duty, leaving is inevitable. Knowing this, it's best and a smoother transition to plan the departure. Planning gives them a chance to find the right successor, the one who is appreciative of the hard work, talent and creativity of the founder, and who can take the business to the next level. When that person is found, it will feel like victory instead of defeat.
This means it is best to start planning the exit before planning the retirement. With proper exit planning, we are discussing how to turn the sale of the business into a win-win situation. A win for the seller and a win for the buyer. There are a variety of different strategies to do this. Still, the plan needs to be tailored to the individual wants, needs and desires of the business owner. There is no cookie-cutter one fits all solution. The seller needs to be walked through different scenarios and potential outcomes to help them determine the right path for them.
Many of them never thought about this before. Many of my clients will say, "I'll never retire," or "I'm going to die with my boots on," or "I'll quit working when they put me in a box!" Whatever the situation, it will be full of emotion, and when emotion runs high logic goes out the window.
Having the right advisor is a significant component of working through the process to find the right solution. Someone who has done it before can bring up issues of concern and help calm the fear of the unknown. The advisor needs to listen and then help the owner construct the plan.
One way to approach the retirement subject is to ask when the owner wants to start taking money out of their business. Most founders have invested way more than just time and money into building their business. It has been blood, sweat and tears! Eventually, they'll reach a point where they will want to enjoy the fruits of their labor. They may want to buy a second home, travel, or have the cash available to do whatever they want. The advisor can help with all of these goals. Often the owner won't consider this retirement planning, but it is.
A good advisor can help a business owner retire even when the owner thinks they'll never retire. Remember, as always, the CSU Bakersfield SBDC is here to help. Our consultants have walked many through the process before, and they will be happy to help you as well!
Jay Thompson is a Business Consultant with the CSU Bakersfield Small Business Development Center. The CSUB SBDC provides premium, one on one, no cost consulting to small business owners in Kern, Inyo and Mono Counties. For more information visit their website at www.csubsbdc.com.