CAN YOU COUNT ON THE SALE OF BUSINESS TO FUND YOUR RETIREMENT


DOn’t assume the value of your business

Are you counting on the sale of your business to fund your retirement? You’re not alone. Many business owners assume that their business will generate plenty of cash to fund a long, comfortable retirement. It’s an understandable assumption. After all, you’ve invested substantial time, money, and sweat into building your company.

It may be a reasonable assumption that the sale of your business can help you reach your retirement goals. However, you may not want to assume that your business’s sale will fund your entire retirement. As Milestone Coach Advisory President Caine Nakata noted on a recent episode of On The Money News, many business owners overestimate how much of their retirement they can fund through the sale of their company.

Below are a few strategies you can employ today to protect your retirement and improve your ability to reach your goals. If you haven’t implemented these steps, now may be the time to do so.

 

Identify your main objectives

What exactly do you want your exit from your business to look like? Retirement can mean many different things to different people. Another business owner’s idea of retirement may look substantially different than yours.

For example, do you want to stay involved in the business as an advisor or board member or even an employee? Do you want to continue earning income from the business and stay invested in the company’s performance? Or do you want to walk away from the company completely?

These are just a few of the questions you might ask yourself. The answers to these questions are important because they can serve as a guide for your decision making.

Get a formal business valuation

You may have an idea of what you believe your business is worth. However, it’s common for business owners to overestimate the real value of their company. A business valuation can be very challenging. It’s also fluid, as it depends on changing business metrics and changes in your market.

A business valuation consultant can help you determine a fair estimate or range of your business’s value. You can use that information to take steps to increase value. You can also use it to more accurately plan for retirement. If you’re relying on overly optimistic valuation assumptions, you could be disappointed when it comes time to retire.

Develop other retirement sources

Finally, it’s important to not count entirely on your business for retirement funding. As mentioned, there are many factors that could impact the amount of capital you raise from a sale. If you can’t meet your valuation estimates, you may not be able to enjoy the type of retirement you had planned for yourself.

Instead, make use of qualified retirement accounts like a 401(k) plan and an IRA. You may want to consider a SEP IRA, which allows business owners to deduct a substantial amount in the form of contributions.

Ready to develop your retirement plan? Let’s talk about it. Contact us at Milestone Coach Advisory. We can help you identify your needs and develop a strategy. Let’s connect today.

Sources

This information is designed to provide a general overview with regard to the subject matter covered and is not state specific. The authors, publisher, and host are not providing legal, accounting or specific advice for your situation. By providing your information, you give consent to be contacted about the possible sale of an insurance or annuity product. This information has been provided by a Licensed Insurance Professional and does not necessarily represent the views of the presenting insurance professional. The statements and opinions expressed are those of the author and are subject to change at any time. All information is believed to be from reliable sources; however, presenting insurance professional makes no representation as to its completeness or accuracy. This material has been prepared for informational and educational purposes only. It is not intended to provide, and should not be relied upon for, accounting, legal, tax or investment advice.