How to Sell Your Business and Retire

There comes a time in every entrepreneur’s life where they leave their business behind and retire. Whether you retire for your grandchildren, health reasons or because you’d simply like to enjoy life, the choice—and timing—is different for everyone. But it’s important to be prepared. Detaching yourself from your business both personally and financially is a complicated process. If you’re ready to sell your business and retire, there are a few things you need to do before you head into your golden years.

Are You Ready to Sell Your Business and Retire?

Often, it’s hard to know when you should cash in and retire. In a recent Gallup poll, researchers found that the average age of retirement in the United States is 62. While Gallup points out that this finding is the highest average age since the polls began in 1991 (when average retirement age was 57) most non-retired Americans don’t expect to retire until 66. One reason for the nation-wide trend is the effects of the economic downturn of the Great Recession. During the Great Recession, the nation’s 401(k)s and IRAs lost a combined $2.4 trillion. Many people are still trying to recoup their lost savings. Another reason for delaying retirement is that the average lifespan is increasing. Americans are preparing by working longer to save more.

A large part of the calculation depends on your financial planning. When did you being your 401 (k), IRA or HSA? Are your monthly payments able to compensate for your lifestyle? Do you have dependents that you’ll need to support on your pension, social security checks or retirement account? Do you qualify for Medicaid in your state? This handy CNN Money calculator estimates how much money you need to save before you can retire. It you’re unsure where to start, it may be smart to enlist the help of an accountant or financial planner.

Find What Your Business Is Worth

Once you’ve run the numbers to tell if you can safely sell your business and retire in the near future, the next step is to prepare your business for sale. Preparation will include a timeline, an exit strategy, and a business valuation from an accredited broker, among other things.

Formal Valuation

First, you’ll need to find out what your business is worth. Contact an appraiser or a business broker, like Sunbelt, to conduct a formal valuation.  Appraisers and brokers will use historical data, income statements, tax filings, staff records, and more to prepare your business’ formal valuation. This information is vitally important to prospective buyers. A well-organized company with detailed financial records and skilled staff represents an attractive investment opportunity.

You must obtain a formal business valuation before you make any other decisions. Sometimes, owners may be biased when it comes to determining the worth of their company and are surprised when the appraisal is less than they expected. If your valuation proves that a sale at this time cannot fully fund your retirement, there are things you can do to boost your business’s value. Strategies like expanding your customer base or training a management team to act as leaders after the sale are ways to draw a higher price point.

Exit Strategies

Depending on your needs and/or desires there are a variety of ways to exit your company and your role as an active executive.

• Close and liquidate—the business will cease to exist and all assets will be liquidized.
• Sell to a Third Party—traditionally the most common way to reap value from your business.
• Be Acquired—larger companies in your industry would absorb your business into their own.

Deciding on your exit strategy will help you determine your timeline.

Timeline

Your retirement timeline is based on your finical planning measures, your valuation and the exit strategy you’re hoping to use. You’ll want to talk to your finical adviser and business broker to work out what your individual timeline will be to sell your business and retire.

Plan for Your Future

It is important to plan for your future both financially and emotionally for retirement, no matter what line of work you are in. But as an entrepreneur, walking away from a company you’ve invested most of yourself in can be especially difficult. Take into consideration what you’ll be leaving behind before you sell your business and retire: your daily routine, a way of life, and coworkers and friends.

Confronting an uncertain future will make the decision all the more difficult, so plan ahead. Perhaps there were hobbies and activities that you never had time for or places you’ve always wished to visit. Keep yourself busy by enrolling in classes, volunteering in the community or committing to a new, special project.

Retirement can cause unease or excitement, depending on your situation. If you need help determining when to sell your business and retire, contact your local Sunbelt Business Brokers for valuations, listings and help fielding offers. With more Certified Business Intermediaries and business-for-sale listings than any other firm, there’s no reason to go anywhere else.