What Every Business Owner Should Think About Before Retiring

April 14, 2022

Davie Kaplan retirement

By Francis Ostrom, CFP®, CBEC® and Scott Kogler, CPA/PFS

Most business owners spend years nurturing and growing a business that will allow them to retire comfortably. When they think about retirement, they spend most of their time thinking about how to position their business for a profitable sale that sets them up for a strong financial future. 

But selling your business for a sum that allows you to retire comfortably is only the first step to a great retirement. To truly enjoy your later years, you need to be prepared both financially and emotionally. 

Financial Considerations

Selling your business can be an important goal for funding your retirement, but completing the sale isn’t the final step. Perhaps just as important as building a saleable business is figuring out how you will convert the proceeds from your business into a regular income stream for retirement. 

You have a number of different options to turn your business proceeds into a dependable income that will last throughout your retirement. Consider leveraging newly available investment assets for successful distribution planning, using strategies that are focused on wealth preservation, income generation and legacy protection. 

The best option for you will likely depend on the structure of your business sale. For example, while some business owners take a lump sum from the sale of their businesses, others might remain involved in the business for several years, taking proceeds incrementally. 

Emotional Considerations

For most owners, the business is an important part of their sense of self. Not only does it provide an income and a sense of purpose, but it also provides social interaction and gives structure to your days, weeks, months and years. Before you leave your business, take time to make sure you’re ready to deal with all the potential changes that will occur as a result. 

Few business owners will be happy and fulfilled with the prospect of empty days and weeks filling their calendars, even if they sold their businesses for a large amount of money. It is not uncommon for business owners to continue to pursue part-time professional endeavors, so consider whether you might want to continue working in your business or in another professional pursuit. If so, make plans in advance for how that might work. That way, you’ll be able to generate anticipation for your new role before you actually sell your business, which may make the transition easier.

Professional work isn’t the only way to enjoy your retirement, so spend some time determining the other pursuits that might be fulfilling for you. Make an effort to approach retirement with the same level of enthusiasm you gave to your business. The first step is to create a list of things you would like to accomplish or experience. It might include items such as learning a new skill, volunteering with a nonprofit, hiring a fitness coach, traveling to certain destinations, attending performances or sporting events, or spending time with children and grandchildren. After you’ve created your list, ask your spouse or other family members to create lists of their own. By comparing lists, you can start making plans for fulfilling and interesting ways to spend your time in retirement.

After you sell your business, you will finally have the time to do the things you’ve always wanted to do. However, you have to make plans and execute those plans to make it really happen. Creating a well-thought-out plan for your retirement will provide the structure, interaction and sense of fulfillment to truly enjoy the benefits you’ve worked over the years to create.  

The CPAs and Certified Financial Planners at Davie Kaplan have combined their expertise to assist many business owners transitioning into retirement and understand both the financial and emotional considerations that are a part of the process. They are available to help you examine your options and develop a plan that will work for you. 

“Certified Financial Planner Board of Standards, Inc. (CFP Board) owns the certification marks CFP®, CERTIFIED FINANCIAL PLANNER™, and CFP® (with plaque design) in the United States, which it authorizes use of by individuals who successfully complete CFP Board’s initial and ongoing certification requirements.”

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