It’s not always easy for a business owner to think about life after work. They love what they do and want their businesses to thrive. As a result, they think about the company’s future but not what comes next after they decide to quit working.
Unfortunately, it isn’t uncommon for business owners to have no plan at all. Reports show that 34% of entrepreneurs have no retirement plan.
Determining how to retire is one of the most challenging things to do when you run a business and don’t know how to exit. Keep reading to learn what you need to consider when considering business owner retirement.
Set Your Retirement Goals
Planning for small business retirement is hard when you don’t have goals. You won’t save enough money to last for the rest of your life or have a way to care for your team when you’re gone.
Setting goals will help you do this. The first step is to determine the age you want to retire. Knowing this number will help you figure out the rest of your plan.
From there, you can figure out how much money you want to live on every month. This will help you calculate how much money you need in savings and investments if you want to live off it for the rest of your life.
Of course, you may not want to retire at this age completely. Some people just take a step back and do a few things in their free time to make money. Many people still like being active once they quit working, so it’s not uncommon for people to continue doing other things to take up their time.
All of this will factor into your retirement calculation.
After figuring this out, you can determine how much money you need to save monthly to meet those requirements.
Remove Yourself From Your Business
Unfortunately, some business owners are at the center of their businesses. Things don’t function without them. The operation would fall apart if they disappeared for a few days or weeks.
This is especially true when you’re the personality of the business. Clients view the owner as the lifeline for the business. Without the business owner, they would go elsewhere to get service.
If you want your business to survive after you’re gone, you can’t afford for this to happen. Let’s look at a few ways to remove yourself from your business.
Learn to Delegate
Delegating is one of the most important things you can do as a business owner. You only have so many hours in the day, so you don’t have enough time to take care of every task a business has.
The problem is that some business owners don’t trust their employees to do their jobs. They continue to oversee everything instead of taking a step back to focus on higher-level tasks.
If you’re in this situation, start delegating more work. It will be hard at first. However, you’ll get more comfortable doing this as time goes on.
Once you start seeing people not crashing and burning, you can start removing yourself from the daily operations of your business. This is important if you plan to sell or promote someone else to handle most of the work.
Become a Faceless Company
Learning to operate without a prominent figure is critical if you want your company to survive after you leave. You don’t want to be the person people turn to when deciding to do business with you.
You want your company to stand on its own. Its products, services, and customer support should be what enthuses people about buying from your business.
To start, try not to be the only person selling your services. This is especially true for B2B companies, where you connect with other businesses and establish yourself as an industry leader.
Get more salespeople involved in the process. Teach them everything they need to know to sell and rely on them to do the selling.
This will reduce the need for you to be involved in closing deals and help remove yourself from the limelight.
Set Up Investment Accounts
Once you have a goal for retirement and have started to remove yourself from your business, setting yourself up for the future is the next step. Just like regular people are advised to use investment accounts, the same is true for you.
Even better, you can invest in some of them like a regular employee would.
Yes, you’ll probably make a good amount of money when selling your business. But you don’t want to count on that to hold you over if you aren’t sure how much you’ll get after you sell.
Here are some popular options for you to consider for your retirement.
A 401k is one of the most common investment vehicles for businesses. Since you’re on the payroll at your organization as an owner, you can divert some of your paychecks to a 401k investment account every pay period.
One good thing about this is the tax savings. Since your investment goes into a 401k before you see taxes taken out, you won’t see a large tax rate if you have a large paycheck. Your rate is how much you earn from your investments at withdrawal time.
On top of that, you can use company funds to match your 401k. This is great if you want to add to your 401k holdings.
Index funds have stood the test of time as one of the safest investments available to people. An index fund tracks a set of stocks on the market. The most popular ones follow the top 500 stocks.
Historically, the rate of return on index funds outmatches the pace of inflation. Even if there are a few down years, the fund’s value historically goes up if you look at the long-term charts.
Many people invest small amounts of money monthly to build their index fund holdings.
Dividend stocks are another great option if you don’t want to withdraw your investments to use them. Dividends are paid to investors by companies that make a profit. Instead of reinvesting money, the value goes to shareholders.
The great thing about this is that you can get monthly, quarterly, or yearly dividends. You can reinvest your dividend back into the market or take them out of the market for passive income.
This is great if you want to retain your holdings after you retire instead of taking a portion out and seeing your portfolio dwindle.
An IRA is another popular retirement vehicle you can set up at your company. Like a 401k, your employer can redirect part of your paychecks to your IRA account. You get a certain amount you’re allowed to contribute yearly.
Also, like a 401k, your tax responsibilities are deferred with an IRA. You don’t pay any taxes until you begin withdrawing your money. Since you’re in a lower income bracket, your tax burden will be lower.
Determine How You Will Phase Out
You may not immediately retire from your business. It may be a gradual process as you pass off more responsibilities and set up your company to run without you.
However, it will be immediate in other cases. You’ll sell your company to another business owner and immediately step away.
Determining how you’ll do this before the time comes is essential. Here are a few ways to go through the process.
Create a Succession Line
If you run a family business, you may not want to sell. You want to keep ownership in the family and give the responsibility of running the company to someone who wants it.
If you go this route, you must plan this well ahead of your retirement. Sit down with everyone in your family who may be interested to see if anyone wants the job.
If multiple people stand up, you’ll need to discuss who takes over or if the responsibility gets shared.
Once you determine who will take over, you’ll need to introduce them to your job. Bring them into your daily life so they can see what they’ll do daily.
This will prepare whoever takes over for the job and ensure the transition goes smoothly when you retire.
Sell Your Company
Selling a company is another popular way to exit the industry and retire. You may not want your family involved, or nobody may want the job. In either case, plenty of other business owners are constantly looking for companies to buy and improve.
To start, come up with a value for your company. Determine your yearly profit and put a multiple on your business.
The older your company is and the more stable your earnings, the bigger multiple you can get when you sell.
Once you start approaching your retirement age, start looking around to see if there are any buyers. You can put out classified listings on business websites or reach out to your network to see if there is any interest. If selling manufacturing business quickly is what you want, having people ready ahead of time is the best way to do this.
Don’t just sell your company to the highest bidder, either. You owe it to your team, who helped make your company a success, to sell your company to someone who will take things seriously and keep growing the company.
Shut Everything Down
Are you concerned that your business may not be viable in the future? With how quickly the world is changing, that’s not surprising. Many old industries are going away in favor of new ones.
That means you may have trouble finding a successor or buyer for the business. It makes more sense to shut things down if you don’t want to go through the trouble.
If you’re in this situation, be sure to inform your team about what’s going on. You want to give them enough time to make preparations for the future. It’s unfair to those people if you drop your company’s closure out of nowhere and don’t give them enough time to line up their next jobs.
Plan for Life After Work
Now that you understand what you need to do during your business life to get ready for retirement, it’s time to think about what comes after. That’s where life after retirement planning helps.
Think about what you most want to do when you don’t have to work anymore. Do you want to move to another country and live the rest of your days in nature? Or do you want to spend more time in the city with your family?
Whatever the case, make plans on what you’re going to do at that point. It isn’t enough to have a general idea about what you want to do.
Yes, you’ll have some time to make plans after you quit working. But the more you can plan beforehand, the easier time you’ll have to get it done when the time comes.
Now You Know How to Retire As a Business Owner
It’s not easy to plan for life after work when you’re a business owner. You have work you love and people who rely on you for a paycheck. You don’t want just to upend everything and close shop when you’re ready to call it quits.
That’s why you need to do some preparation and learn how to retire when you’re a business owner. When you do, you’ll set yourself up for success and ensure the people who work for you are set up for success after you’re gone.
Did you find this post helpful and want to learn more tips to prepare for the future? Read more posts on the blog to get more great advice.