For a number of American citizens, it is a challenge for them to plan their retirement. Over 30% of those who own a small business are aged above 50 years. So, what is their future like after they start planning their retirement from the businesses they own?
If you are a small business owner, the thought of selling that business for a comfortable exit may have happened in your case too. It is a good idea to fund your exit through that sale. However, with every daily financial requirement of operating that business, your well-planned retirement strategy may be delayed because of some uninformed assumptions. Below, we will take a look at some of those assumptions.
The Assumption That the Sale Is Certain To Happen
Some expect to sell their business just for a good sum of money to enjoy their retirement life and so they do not focus on an exit plan. This appears to be a sound strategy, but it does not work out just as planned at all times. Several businesses depend on their owner very much, so without him or her, these businesses would find survival to be tough. If your business is like this, that difficulty can have an adverse effect on the interest of the potential buyer.
The Assumption Related to the Business Market Value
Several entrepreneurs may find that their business’ market value does not match their own expectations. Albeit you have an understanding of how much your small business is presently worth, the trade cycle can affect its attractiveness. The economic declines and expansions will be more down the road. In the event that you are nearing retirement during a recession, your business’s marketability will possibly be affected.
At that time, no potential buyer can purchase your business at the price that you may wish to get. For this reason, many sell their small business with seller financing. With this form of financing, you will eventually get installments during several years rather than a single payment at the time of sale.
You might just have assumed these things, but you certainly can make the right decision by learning from your mistakes. A small business will only attract a buyer if it has sustainable cash flow after you leave it. For it to be financially sustainable there should be processes established so that revenue will keep coming after you exit. By training workers to assume your present workload, you give yourself much more freedom and increase your business’s value and marketability.
Have that business appraised to a position thinking of the future year you would be planning to sell it. A business’s valuation tends to identify areas which could make it more valuable if it is improved or modified.