What's your exit strategy? If you are like most owners, you don't have one; according to a recent national poll 67% of 430 owners surveyed in 2001 did not have a retirement strategy. Yet, most (55%) calculated personal retirement and succession planning integral to their business' future. For many, their business is crucial to a secure, comfortable retirement.
Do you have a family-owned business? If so, retirement planning is even more important. Most small and medium-sized businesses in Canada and USA are family-owned and surveys propose owners are dedicated to pass a successful venture on to the next generation. Many hope the business will fund their own retirement and the family's fortunes for years to come.
Experience, however, shows there is often little planning or preparation for transferring ownership within families. In fact, 70% of Canadian family-owned businesses do not pass on to a second generation and just one out of 10 move to a third generation.
You should learn how to plan a future for your business and yourself and which steps should be involved in retiring from a business. You should learn also how to ready your family and others for the challenging decisions ahead, and the legal, financial, taxation and even emotional issues you'll need to begin.Think, for example, about what you want from your business. Are you interested in great prosperity? Do you want to make a legacy your family can carry on? Planning to go public or sell out to the highest bidder? Or, is your business simply a way to make a living? Each of these goals calls for a dissimilar set of growth strategies and different retirement plan for each owner.
Separately from figuring out how you should exit, retirement planning also deals with another serious issue for many business leaders — succession. By choice of not, you will someday leave the business. Who will take over for you? Is it someone who knows where to take the business next? Would you or your family be able to draw upon the full value of your hard-earned success?
Making a retirement plan now and fine-tuning it occasionally lets owners begin a process that:
• Protects the full value of their investment
• Generates a potential income stream for retirement or upon disability
• Reduces the tax collision on their estate, their spouse and others
• Creates a smooth management transition with little or no business trouble
• Allows family members or key employees to self-confidently assume ownership
• Enhances the overall worth and strategic direction of the business
Done property, your retirement plan can help you find the best way to finance your personal exit strategy and recover the time and money you've invested in the business. It's also important to understand why you shouldn't do this alone and should try to find out the best outside advisors you can find to enhance your decisions on the many financial, tax and even family challenges.
Still need convincing? Consider the significant personal and strategic benefits that can run from starting your retirement planning now, no matter what life stage your business is at.
THE PERSONAL BENEFITS :
Retirement planning is actually all about you, the owner. At its heart, retirement planning addresses how you can confidently transfer ownership. Every owner's situation is different, but advance planning helps you answer these questions:
• How much income would I need to retire or do something else with my life?
• Do I have a rational exit strategy from the business?
• Would I need to sell the business? How do I find out how much it is worth?
• Do I want an all-cash deal? Would I be ready to finance part of the sale?
• Do I want to be involved in the business, but not day-to-day management?
• Are family members, employees or others interested or prepared to play a better role in the business? Will they need my help?
In many good wishes, a retirement plan is your life strategy. For those with family members, business partners or employees interested a plan can also help with their life strategies and get rid of their doubts. Retirement planning can also be an effective tool for smoothing out family, partnership or management differences. Planning calls for collaboration and long-term thinking about personal needs. The process often reveals differing points of view and agendas on everything from career choices to who is permitted to ownership shares.
What's important for owners to know is that the retirement planning process deserves and requires time to create and realize. With a plan in place, owners can assertively fine-tune and change the plan as time passes to ensure their financial and personal well-being is secure.
THE OPERATIONAL & STRATEGIC BENEFITS :
Retirement plans also offer major benefits for day-to-day operations and the long-term strategy for your business. With planning, you can actually take steps to increase your business' value in the eyes of investors, lenders, suppliers and customers.
Without a plan, particularly effective long-term tax planning and ownership transition agreements, your business can easily be unavailable for many months. A retirement plan can also help disclose operational weaknesses that can be fixed in time to maximize the business' value just as the training of key employees or family members, for example, may become a priority. Not exceptionally, the process may also reveal that the business is not worth as much as originally thought or a different exit strategy is needed to return the owner's investment. For example, what if no one wants to buy the business or no family member is ready or interested in taking over?
Retirement planning is also valuable for its long-term outlook. Typical marketing and strategic plans rarely stretch beyond a year or two, but retirement plans must look many years ahead. It's why some call the retirement plan a "second vision" for your business, asking long-range strategic questions such as:
• What is the future direction of the business?
• What products or services will we sell in 10 or 20 years?
. How will our markets change in that time? What types of people and resources will we need to compete?
• Who are the key people to develop and care for the future?
From a strategic perspective, retirement plans can even command greater respect than other business plans because of the personal stakes concerned. By nature, a retirement plan has the "buy in" of future leaders and they must work with today's owner to ensure it's implemented in the end, strategic advantages often seen with retirement planning include:
• Motivating key employees or family members to seek better training and skill to prepare for future roles
• Aligning the needs of the company with the resources accessible
• Helping the company recruit and retain better people
• Encouraging new ideas to improve internal processes, as well as the businesses outside opportunities
• Descriptive the owner's intentions, helping to reduce disappointment and possible departures of key people
No money to fund your retirement years. No one interested in buying the business. No one ready to take over. If you don't want unpleasant surprises like these, you will want to invest the time and effort now to create your personal and business retirement plan.
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