Most business owners spend the majority of their time focused on growing their businesses, so personal planning often becomes an afterthought. However, the study Retirement Checkup: Small Business. Big Dreams, on small business owners and retirement reveals that significantly more small business owners feel they can retire earlier and are counting on the sale of their business to be financially prepared for retirement.
For Las Vegas residents, it’s no surprise that feeling confident in one’s retirement requires thoughtful and detailed financial planning. In fact, regional data from a new Guardian study on millennials’ financial habits reveals that nearly 80 percent of all residents in the Southwest United States place strong emphasis on retiring with a sense of security, and a higher than average proportion say having a solid long-term plan is a top priority compared to residents in other U.S. regions. For those who own a business, this should factor into their full retirement picture. Many business owners rely on selling their business to help create a comfortable retirement for themselves. Yet, few have actually started preparing.
Whether you’ll be selling your business to an outside buyer or transitioning it to a family member, transferring a business can be a big financial event, so succession planning is key. Many small business owners today are in no hurry to develop a succession plan and many lack a formal retirement plan, too.
To better your chances of creating the best outcome, business owners need to start thinking about an exit strategy and retirement from the day they start their business. Millennials, in particular, may feel like retirement is in the distant future, but with 24 percent owning a business, more than any other generation — early planning is a key consideration to long-term success. Here are three recommendations small business owners in Las Vegas should consider when contemplating retirement:
1. KNOW THE VALUE OF YOUR BUSINESS, AND ACCUMULATE WEALTH OUTSIDE OF IT
It’s always a good idea to diversify your wealth, especially if there’s a lifestyle you’d like to maintain in retirement — a financial professional can help you find areas where you can receive income during retirement. Make it a priority to engage in other investments and retirement funds, so you have a few sources of wealth outside the business and be sure to stay aware of your company’s value. In many cases, the value of your business may not be what you anticipated. Consider having a business valuation by an independent third party who has experience with business valuations, so you can get a good sense of retirement needs and ensure there are no surprises when it comes time to sell the business.
2. CONSIDER THE INFLUENCE YOU HAVE AS THE OWNER
Many business owners are key to the success of their company. Consider this: If you, the owner, were to be removed from the equation, would the business be able to continue at the same level of profitability? If the answer to that question is no, then a buyer would most likely not be interested in purchasing the company. The ultimate sustainability plan is to ensure the longevity of your business, beyond the time when you are personally involved in it. This will provide a more valuable investment for a potential buyer.
3. BUILD A SUPPORT TEAM TO GROW WITH YOU AND YOUR BUSINESS
Planning for retirement and preparing your business for succession are big undertakings. It takes time, a plan, forward thinking and helps you avoid surprises when retirement approaches. Two-thirds of small business owners believe that adherence to a well-defined financial plan has positively impacted their ability to save for retirement. It’s good practice to talk with a financial advisor who can help you create a business succession plan and create long-term value and sustainability. Find a professional you trust to help you with financial planning needs as you and your business grow. Retirement planning and business succession go hand in hand. Selling your business doesn’t have to be challenging. There are some common steps you can take to plan for that day, based on your goals and objectives. Las Vegas residents already see the value of a secure retirement and long-term planning. Taking the next step to work with a professional and develop a plan is the best way to ensure a confident retirement and a strong future for your business.
Travis Scribner, is a managing partner with WestPac Wealth & Wealth Strategy Partners and a financial representative with Guardian. He is based in Las Vegas and works with business owners and other professionals to develop customized financial strategies.