Five Smart Retirement Strategies for Entrepreneurs
Most small business owners in America are understandably focused on expansion and viability. Retirement is not always top of their list of concerns - in fact, nearly 40 percent of small business owners in the U.S. don’t have a retirement strategy at all.
Unless you plan to work to the very last day of your life, it’s a wise move to think about retirement and possible scenarios for funding that change.
Sell the business: Get an appraisal for the business, even if retirement is still a ways off. Use online tools, such as BizEquity or Free Valuations Online. Getting an estimate can guide your planning for the future. The ability to realize the maximum return on the sale of a business to fund a well-earned comfortable retirement requires at least five years, if not more, of preparation and planning.
Groom a successor: Not every business has a buyer waiting in the wings. The number of small business transactions during the third quarter fell nearly 9 percent nationwide from the same time last year. Why leave it to chance? You can select someone, a family member or key employee, and prepare them to buy the business when it’s time for you to retire.
Put a funding plan in place: Create a buy/sell agreement, and figure out how it will be funded. The choices typically range from insurance policies to external lines of credit to internal sinking funds. You can also arrange a staged exit funded by profits.
Disability plan: There is no guarantee that your retirement plan is foolproof. Cover all the bases. Make sure you have a plan in case of illness or incapacity prior to retirement age. According to a recent report, “Small World, Trends in U.S. Small Business Market,” only about 20 percent of small businesses have life or disability insurance.
Always have an alternative: Run all the possible scenarios, both good and bad. Expect the best, and plan for the worst is wise advice.
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