Retiring Right Takes a Plan
Being a business owner, you have many decisions you need to make every day and perhaps the most important are the decisions you make to secure you and your family’s long term future.
It is easy to busy with the day-to-day operating of the business and postpone the long-term planning for your future and retirement.
The result being that you never really knows when you can retire or if that retirement will be what you expected. This leaves you and your family uncertain about their future.
In order to retire rich, or at least with the lifestyle you desire, you will need to plan for your retirement as soon as possible.
To plan for a successful retirement, there are 5 critical steps to rest assured that your retirement is exactly what you planned for and that you are on track to achieve it:
Step 1: Determining the value of your business
Step 2: Establish possible deal structures when selling
Step 3: Calculate Tax Ramifications of the Business Sale
Step 4: Evaluate income after retirement
Step 5: Create the plan and update
Critical Step #1
Determining the value of your business
Seven out of ten millionaires in the United States are first generation small business owners with the business asset making up approximately 65% of their total asset ownership!
Retiring RIGHT From Your Business
You would think that with the business being such a large portion of the net worth, every business owner would know what their business is worth, right? Sadly, only about 15% of business owners actually have an idea as to what a buyer would pay for their business on any given day or the fair market value of their business.
Fair market business value is:
The price, expressed in terms of price equivalents, at which property would change hands between a hypothetical willing and able buyer and a hypothetical willing and able seller, acting at arm’s length in an open and unrestricted market, when neither is under compulsion to buy or sell and when both have reasonable knowledge of the relevant facts.
Although a you might not be actively considering selling, there are numerous other reasons why a you will want to know the value of your business:
• Transferring the business to a relative or key employee
• Merger with another business
• Financing for working capital or equipment
• Legal issues such as a divorce or partner litigation
• Tax issues such as Estate planning
• Adding a partner to the business
• Long Term Business Planning
Just as an employee would check their retirement account on a regular basis, you should also check the value of your business every 3-5 years. This allows you to have realistic expectations of the value of your business and reduce any surprises when you do decide to sell or transfer your business.