When you own your own business, your identity often gets wrapped up in your company and its image. All too often, small business owners don’t think about their exit strategy until it is too late. Deciding when to retire shouldn’t be left to chance. Careful planning, even decades before retirement, can help you and your business transition comfortably when it comes time for you to leave.
Setting Your Course into the Sunset
First thing is first, when do you want to retire? Are you a business owner who imagines helping your customers until the day you die? Do you want to travel the world or become a caregiver for your grandchildren?
Your decision of when to retire should start with your own long-term life goals. Think of it as strategic planning for your personal priorities. An executive coach can help you identify your priorities in retirement, and then strategize about how you can meet goals that have more to do with your own enjoyment than your company’s bottom line.
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Building a Financial Retirement Plan
Once you have established your retirement priorities, you must prepare your finances to match your decision of when to retire. Many business owners rely solely on the sale of their business – to family members or outside investors – to fund their retirement. Unfortunately, far too often they do not have realistic expectations about the sale price for an investment they built over decades of hard work.
You wouldn’t allow your business’s investments to be so focused on a single transaction. So why build so much risk into your retirement plans? There are retirement investment options open to small business owners at every level of business success. By working with an experienced financial planner and budgeting for retirement now, you can ensure that you will have the capital to fund your end-of-life plans and expenses.
Being Prepared for the Unexpected
Contingencies and options are essential for any successful strategic plan. That is also true for a business owner’s exit strategy. You may not always control when you must retire. If you become unable to do the job due to an accident or degenerative disease, you must have alternatives in place to fill the gaps and make up the loss of income.
For many small business owners, this means maintaining sufficient disability insurance to pay their own expenses and pay a replacement to manage their business in their absence. It may also involve systematizing your work and creating formal policies and procedures for things you do out of hand. That way, if someone needs to step in unexpectedly, they won’t be driving without a roadmap.
Training Up Your Replacements for When You Retire
Unless you expect to wind down your business when you retire, you will need to prepare a replacement to do your job. Your exit strategy should include cross-training next-level executives to step into their new roles early. Carefully building your executive employee pipeline is not something that can be done at the last minute. Instead, your succession plan’s education and coaching component should begin years before it is time to retire. This will give your successor time to adjust to his or her new position and make the key connections that keep your business going.
Letting Your Strategic Plan Guide Your Decision on When to Retire
Once you have your personal, financial, and business strategic plans in place, you can wait until the time is right to retire. Be clear with your board, C-suite team, and potential successors about your anticipated timing. Then watch as you and your corporate team executes the strategic plan. With all the necessary pieces in place, there will come a moment when you feel comfortable saying it is time to retire and handing over the wheel to the next generation of your business.
David Stanislaw is an organizational development specialist with over 30 years’ experience helping business owners plan their exit strategies. Through business succession planning and executive coaching, David helps businesses owners decide when to retire. Contact us to meet with David to start building your family business succession plan today.