Retirement dreams for many often include leisure, travel, and a new way of living. If, however, you have a business, how will you retire?
I know of a couple, let’s just call them John and Jane, that run a successful framing business. It’s a small business. They’re known for their ‘can do’ attitude, ability to deliver on time and the quality of their work.
Retirement to them is a distant concept – one they will address ‘one day’. John and Jane don’t know if they will sell or stay – they think that these are their options.
It’s not the financial aspect of retirement that worries them. It’s the worry of ‘what are we going to do’ if we retire.
How Will You Retire From Your Business: Missing Their Roles
Work plays an important part in our lives. Apart from the income, it gives structure, time management, self expression and socialisation. It also gives us a title or recognition of our work. Leaving paid work can be a big adjustment for many. Retiring from a business can also be a big transition.
Jim Molis, writing in bizjournals.com, says, ‘while almost 60% of business owners say they would exit today if their financial security were assured, over 60% also say they worry about missing their role in the business after retiring. With it being so difficult to let go, many owners don’t know when — or if — they will retire. Eight in 10 business owners do not have a timeline for retiring and the rest say they do not imagine doing so at all, according to MassMutual’s 2018 Business Owners Perspective Study’.
Ingrid Miot of Bamboo Growth Consulting has a background as a Chartered Accountant, and brings extensive skills and experience to her clients. Ingrid, however, is much more than a ‘number cruncher’. Courage, creativity, compassion and sensitivity are central to Ingrid’s business philosophy.
People put a lot of time, energy and emotion into a business. ‘Because of what it takes to build a business they haven’t had a chance to invest in hobbies or build communities. They’ve poured everything into their business. To suddenly sell can be an incredibly brutal thing, and hence I’m a really strong advocate to just tease out the options’, says Ingrid.
How Will You Retire From Your Business: Baby Boomers And Business Challenges
I asked Ingrid if baby boomers have particular challenges in selling a business.
‘Yes, arguably they do. Given that prices are set by supply and demand they face the challenge that many other baby boomers will also be looking to sell their businesses hence, it’s really important to invest the time to prepare their businesses for sale and to get the timing right.
More fundamentally, we’re living through an extraordinary period in business as we transition from the Industrial era to the Digital era. The Covid pandemic has accelerated digital transformation so a deeper challenge is that those businesses were established in a different era and may not be as relevant and valuable in the future and the potential buyers, are likely to be of a different generation and mindset. Hence, once again the importance of not being complacent but rather take the time to optimally position and package the business for sale. Consider if there are some relatively inexpensive improvements (eg. creation of an online offering) that would make the business more valuable’.
How Will You Retire From Your Business: Challenges In Transitioning From A Business
‘This depends on the role the business has played in the owner’s life, says Ingrid. ‘Certainly, for founders it’s highly likely the business has been their primary focus, has shaped the structure of their days and more importantly, has been integral to their identity. So, without the business they can feel at a tremendous loss. In that case, it can be a very hard transition.
Hence, I would strongly encourage business owners to carefully consider what they would like the next chapter to look like and to consider their options.
An alternative to an outright sale is in fact to step back from an operational role, to play a part-time strategic role whilst developing key members of their team to take on leadership roles and ultimately, to own a stake in the business.
This can be a terrific option providing purpose, ongoing professional stimulation, structure, social interaction not to mention financial reward. Many businesses are not that valuable on sale but instead can deliver healthy returns if they are held for a longer period’.
How Will You Retire From Your Business: How Do You Approach Selling A Business?
‘Think of it like selling a property’, advises Ingrid.
‘Firstly, timing is critical. Carefully consider what’s happening in your industry – is it growing, stable or declining? Equally, what’s happening in your business? Ideally, you want to sell when your business is performing well but if the outlook is bleak and unlikely to change, then best to get going and sell sooner rather than later.
Secondly, you want to position it well for sale to optimise the price. Carefully consider what kind of business it is and what the core assets are. Then consider who would value that kind of business, and why so you can identify potential buyers/types of buyers. Beyond a multiple of profit, carefully consider what they would value and hence, what areas you should develop before taking it to market or what aspects you need to promote when selling it. Based on your deep market knowledge, you may wish to create a potential vision of how the business could be further developed so potential buyers can readily see the potential and hence, value.
Finally, like with a property declutter, organise and refresh the business so your words are reflected in the tangible elements. If it’s a bricks and mortar business, make sure it’s neat and tidy and looks alive and healthy, not tired and run-down. Endeavour to complete all your internal projects (eg. is all your paperwork up to date and digitised, do you have a written Operations manual, are your accounts up to date and readily available.)’.
Can You Offer Tips For People Looking At Retiring (from a business) in 5 years?
If you don’t already have a clear vision of your exit/succession plan then start to develop one so that you have time to evaluate different options and you have a clear idea of the areas you need to work on prior to sale. Clarify your priorities. Be specific so you can readily evaluate your options and you can clearly understand the trade-offs.
Confirm you have a business to sell and not a job to sell. If necessary, make the necessary changes well in advance so that it is truly a business i.e. it can stand independently of you.
Try to step back from your business to see it afresh and recognise the real value and potential of your business going forward so that you can clearly communicate this to potential buyers. You know your business better than anyone else so don’t just rely on a broker to figure out how to promote it.
Pay close attention to market trends and feedback from younger people who could be offering you valuable insights into how to make your business more relevant going forward.
Be realistic and open to different possibilities’.
How will you retire from your business? Let us know.
Thank you Ingrid for your insightful comments.
To contact Ingrid, please see Ingrid’s website for more about Bamboo Growth Consulting: www.bamboogrowthconsulting.com.au
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