How Small Business Owners Can Prepare Now for a Better Future
While it can be intimidating to think about retirement as a small business owner, the earlier you start planning, the smoother the transition will be. Yet for such an important issue, research has found that many small business owners don’t prioritize retirement planning. In fact, in a recent survey of small business owners conducted by Manta, an online resource to help small businesses promote themselves, findings showed that 34 percent did not have a retirement plan.
Creating a solid plan now can be hugely beneficial in protecting your business, and realizing your vision for retirement—no matter how far away that may be. Here are some key steps to help you in your retirement planning.
1. Consider what you want retirement to look like
Assessing your retirement needs is an important first step. Consider details like: what age you’d like to retire, how much income you’ll need to live comfortably, where your retirement income will come from and what other expenses you may have in retirement. It can be helpful to utilize financial tools like a retirement calculator, or to consult with a financial planner to create a plan that covers all of your future needs.
2. Develop an exit strategy
Creating a timeline for retirement can be important to the transition of your business. Once you determine when you’d like to retire, focus on next steps for your business. Do you want to transfer ownership to someone else? Do you want to sell your business? Do you want to hold an initial public offering? Having a clear exit strategy can be key to a smooth transition for you and your business as you move into retirement.
3. Select the right retirement plan
Once you’ve determined your retirement needs and developed an exit strategy, it’s important to choose the right retirement plan. Consider key details, like plan contribution limits, dates the plans can be drawn from and any tax advantages that may be included in the plan. Small business owners can also take advantage of retirement plans that aren’t available to employees of larger business. It’s never too early to research your options to understand the best fit for your needs.
4. Appraise your business value
Since business owners can tend to overestimate the worth of their business, it’s important to conduct a business valuation to get a clear and true understanding of the value. As a business owner, this will help to confirm how much money you are expecting from the sale of your business in retirement.