Exit Planning - Four Fundamental Questions

Retirement planning begins with you. What do you want your retirement to look like? Once you have figured that out, you can expand the circle and include your spouse, your children and other stakeholders you think may have an interest in your retirement such as your employees.

There are four basic questions you will need to be able to answer:

1. When do you want to retire?
2. How are you going to live?
3. What will you do?
4. Who is going to take over?

The timing can be anything you decide it should be. Attaining a certain age could be one, but it could also be an event like the independence of your last child, being eligible for social security or medicare. Make that decision and then make everything you do a step towards that goal.

Decide what kind of lifestyle you would like to have. Are you going to travel a lot? Will you downsize your residence or move somewhere else? Build a diversified portfolio of funds that will be there when you need it. The riskiest one is your business. Do not rely on it alone for retirement funds. Make sure you have at least some funds outside your business, preferably enough to retire comfortably without relying on the sale of the business. 

As a business owner you may have been intensely focused on building it. What are you going to do when it is gone? Will you have a social network? Will your life still have purpose? How will your spouse feel about having you around all day?

And most importantly, who is going to take over? Only 20 to 30% of all transitions are successful, so it is necessary to have a Plan B here. Children are less likely to take over than ever before. A third-party sale is unlikely unless you have something really unique or valuable. The most common transition is a management buyout and, finally, the least attractive one, liquidation. A variation of the management buyout is the worker cooperative where all or most of the workers become owners, not just the managers. That could be your best option as it spreads the risk on more hands.

Convert an Existing Business to a Worker Cooperative

The Conversion Process

The Business Owner's Guide to Financial Freedom: What Wall Street Isn't Telling You

Retirement for business owners like any other retirement, but, yet, it is very different. As a business owner, you have far more options available. Most business owners have not thought much about retirement. This book makes it easier to make intelligent choices.