Preparing for Retirement as a Small Business Owner - Lancaster Chamber of Commerce
Preparing for Retirement as a Small Business Owner
Business Resources, Chamber Updates, Local Stories, Member contributions

by Ken Eshleman, Financial Advisor and Member Owner, Domani Wealth, now part of Savant Wealth Management

As a small business owner and leader, you’ve spent many years building a legacy and bringing a vision to life.

Contemplating retirement can be difficult – you’ve invested extraordinary amounts of time in your efforts and created something to which you’re fully committed. It often becomes part of your identity, and imagining life without that, well, it maybe hurts to think about.

However, none of us can stop the passing of time, and because of that, as business owners, we know it’s best not to delay focusing on important things.

Sufficient time is essential in thinking through retirement as a small business owner. Sometimes, it’s so hard to walk toward that age when health challenges or other unexpected factors can become the driving force of retirement, and there may not be enough time to develop a well-thought out succession plan.

One Day

An initial step for the business owner to consider is what does retirement really look like for you?

Is it the transfer of day-to-day management to another team member while you strategically overview operations and maintain ownership? Or perhaps its an outright sale of the business? If there are next-generation family members involved in the business, interested in greater management responsibilities and at least partial ownership, the answer could lie somewhere in between.

Plan Specifics

In coordination with thinking about what retirement looks like, you can work with a CERTIFIED FINANCIAL PLANNINGTM Professional and CPA to develop a financial model which will take into consideration:

  • Assets and liabilities outside the business
  • The value of the business
  • Other sources of cash flow not directly tied to the business, such as Social Security or pensions
  • Financial cash flow needs in retirement
  • Taxes
  • Inflation
  • Investment returns
  • Other potential risks to a successful retirement.

This is completed to see what retirement might look like for you as a business owner. Sometimes, an outright sale of your business is critical to your financial security.

The Team

Similar to how you surround yourself with the best employees to help support your business, so, too, should you surround yourself with a team of competent professionals that can provide the necessary guidance in developing a well-thought-out retirement plan. This team usually consists of a Certified Financial Planner professional, an accountant, and an attorney to help put together planning models for

your consideration. If the decision is made to sell to an outside party, another critical seat on the team will be filled by either a qualified business broker or an investment banker.

A Sale Process

A competent business broker or investment banker can discuss with the owner ways to best position the business for sale or whether a liquidation of the business may be preferable. They can also discuss what realistic valuations might be given current market conditions as well as the best approach to reaching either strategic or financial buyers (or both) to create as many qualified buyers as possible. Usually, an investment banker will require the business be of a certain size for them to become involved – generally, the business must be generating $2M annually of EBITDA. Smaller businesses below that EBITDA may need to find a qualified business broker.

Critical Planning

Retirement planning by business owners is critical so you can be prepared, when the times comes, to have the flexibility to choose what you want your retirement to look like. Since any good plan requires time to implement, this effort should be undertaken sooner rather than later.

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