Retirement is a subject many small business owners either deliberately shelve or shy away from taking any meaningful action. Research conducted by online resource center Manta indicated that 34% of nearly 2000 small business owners surveyed do not have a retirement plan. Of this group, another 36% said that they would still seek other job opportunities upon retirement.
These numbers make owners and their businesses persons of interest in the retirement equation. Questions of succession and continuity make the discussion even broader.
Interestingly, 34 % of small business owners surveyed in the Manta poll said that they do not have a succession plan. So what is the way forward for a small, family-run business whose owner-cum-leader wants to retire?
The answer is simple: retirement tax planning and creating a business model to reflect that plan.
1. Make It Business as Usual
The good thing about retirement is that it needn’t catch you off guard like an earthquake! All along you know it’s coming and the best thing is to have a plan. Here, some options exist.
First, a small business owner can groom a family member to take his place upon retirement. Primarily, this could be a person who has previously participated in the operations of the business or has the right combination of skills and entrepreneurship traits necessary to run the business.
On retirement, the head can play an advisory role, committing limited amounts of time to the business but still feel safe that the vision rolls on. The focus here is to retain the key leadership of the organization within family control while ensuring that business does not come to a halt.
Another element that advances the same idea is to begin coaching your leadership team as part of your retirement plan. As a leader, you hold the vision of growth for the business. Coaching a leader from your pool of employees is like updating your vision. It will be carried over by those who come along.
2. Mergers and Acquisitions
Handing over your business through M & A firm is also an option. However, some things come to play when you think of selling your business. The first one is finding out whether your business will still have the selling value you set as your retirement package.
If your retirement package is $1million for instance, see to it that the business is sellable at that amount. Consider the changing market dynamics and the relevance of your products in regard to time.
To a good extent, an M&A firm retains a sense of resemblance to the original firm. Even if some operation styles may change, it takes some time before shutting down your business elements of the old firm are completely phased out. Besides, the acquisition may rely heavily on the template of the older firm thus helping to push the legacy of the previous owner. Importantly, even when planning for an M & A, setting aside some savings while you are still in control.
3. It’s Sad To See You Close Down
Retirement planning for small business owners should be given priority from the early stages of a business. As the business grows, the owner must set a plan of continuity through calculated step-by-step actions. Given that there are a number of better options at the disposal of a business owner, closing down entirely might not be a good way to exit. Entrepreneurs focus on creating businesses that last far beyond their time. The purpose of a succession plan is to allow the enterprise to continue even in the absence of the integral people, whether their departure is planned or not. Family run businesses, in particular, need a clear-cut succession roadmap given that personal interests and prejudices may come to play.