Businesses grow and evolve.
The business you’re leading today isn’t the same one you or your family member started years ago. Just as your company changes, your place within the company will also shift.
And there will come a time when you want to transition into a new role or step away from the business and retire.
Selling your business is a monumental decision—one that should take great thought, care, and intention. With a comprehensive financial plan, you can ensure your business supports your vision no matter what twists or turns lie ahead.
By understanding your needs, your goals for the business, and having the right plan in place, you’ll be well prepared to take the next step. Here are three signs that could indicate you’re ready (or almost ready) to sell your business.
1. You Want A New Role Within Your Company
While being the boss comes with its perks, it can also be tiresome and complex. After building and running a business for years, you may be ready to develop into a different phase of your career.
Perhaps you’re interested in pursuing a subsection or specialty of the company where you have a lot of talent but haven’t had the time to dedicate to it. Be mindful of if you would need to acquire additional training, certifications, or education. If so, look to pursue it and plan for it now.
You may also be interested in consulting, either for your company or for various businesses in your industry. If you see yourself less involved in the day-to-day decisions but still passionate about your company, you could look to be a key board member.
Create A Streamlined Exit Plan
Another excellent transition opportunity for business owners is to take on a partner. Doing so could help you shape and mentor a young, up-and-coming industry titan, whether that person is a family member, devoted employee, or someone external.
No matter the route you decide, you must create a streamlined exit and transition plan. As you prep for a sale or groom a new leader, be sure you clearly notate your new desired work arrangement in the deal. In business, you don’t want to leave anything open for interpretation.
It’s important to understand that these things take time. It can be nearly impossible to solve the entire succession planning exercise in one go-round. Try breaking the process up into bite-size phases, so the process is less overwhelming.
Often, selling or gifting shares in smaller lots over time can ease the pressure on you and the new shareholder. If you have a new partner, you can take your time training them. With ample time, what seems like a daunting and impossible task can be manageable.
2. You’re Ready to Retire
At some point, you may be ready to step away from your business more permanently. It’s likely time to sell the company when you’re ready to retire, but you should begin creating a retirement plan and exit strategy well in advance.
Again, the process takes time.
You’ll want time to find the right buyer and may also seek more flexibility for when you want to sell. There are a few signs to look out for that may indicate that you’re ready for retirement:
You’ve reached your “retirement number,” and you’ve paid off all your debts.
You have a healthcare plan in place—whether that’s Medicare, COBRA, the marketplace, etc.
You can access your retirement accounts with minimal withdrawal penalties. If you retire before 59 ½, you have limited options for withdrawals without penalty. We can help you supplement your cash flow until then.
You’re getting more easily distracted and are unsatisfied with your daily routine.
You have a new life plan ready to execute.
If you can check those items off your list, it’s time to move on to a couple of other critical areas business owners need to consider before hanging up their hats.
You Won’t Want To Miss These Retirement Planning Considerations
First, know if you have a comprehensive estate plan in place. A well-crafted estate plan presents a clear outline of your future wishes while allowing you to preserve your wealth and leave a legacy you are proud of.
You also need a buy-sell agreement for your business and ensure that other important documents are in place before you set off into retirement. Take the time to update all systems, employee handbooks, and personal agreements, so everything is up to snuff.
Think about selling your business like selling your home. You want to present the best possible version of it so you can get top dollar—so start your maintenance, renovation, and upgrade projects now. The best part is that we can help you navigate that process and grow the value of your business through our Business Services.
3. You Have A Wonderful Financial Opportunity
How much money would it take for you to walk away from your company today?
Think about it.
It’s not uncommon for people to approach successful business owners with offers to buy their company. As such, you should have a “dream” number in the back of your mind just in case.
Ripe financial opportunities abound in well-connected and specialized areas such as physicians, dentists, and optometrists. Perhaps your priorities have shifted during the pandemic, and this offer could help you fulfill a goal to retire early, take a dream vacation, or pursue a different line of work.
But, remember that selling your practice earlier than intended could come with significant consequences to consider, like healthcare, cash flow, and retirement savings. You don’t want to be unprepared for the future, so be sure to work through the numbers with your financial team via a retirement analysis.
What’s A Retirement Analysis?
During a retirement analysis, a financial advisor will help you determine if you can safely retire. At Toberman Wealth, we run a Monte Carlo simulation on your personal net worth that considers all future inflows and outflows, inflation, and investment returns. The simulation consists of 1000+ trials to show the percentage likelihood of maintaining your lifestyle once the business is out of your hands.
Before You Sell, Make A Plan
A formal exit strategy, retirement plan, and timeline will help you know when to make the best financial, personal, and business decisions. Set expectations and parameters on exactly what you want your retirement life to look like.
Selling your practice will undoubtedly be the most important professional decision of your life, and it’s not something that should be taken lightly or completed hastily.
The difference between success and failure in creating and implementing your business succession plan could be 7-figures or more. And you certainly don’t want to leave money sitting on the table.
That’s where we come in. At Toberman Wealth, we specialize in helping business owners get the most out of their practice—personally, professionally, and financially. Think of us as your Project Manager; we facilitate and coordinate all the essential details, meetings, and experts.
We know that selling your business comes with numerous emotional and financial considerations. You don’t have to walk this journey alone.
If you’re ready to sell your practice or have some questions about the process, give our team a call.
Craig Toberman is the Founder of Toberman Wealth – a fee-only, fiduciary financial advisor based in St. Louis. He assists families and businesses with strategic financial planning and long-term wealth management. He has over a decade of experience in financial services and has crafted custom financial plans for hundreds of families and businesses.
Craig received a Bachelor of Science (B.S.) degree in Agricultural and Consumer Economics from the University of Illinois and a Master of Business Administration (M.B.A.) degree in Finance from Saint Louis University. He is a Certified Financial Planner (CFP), Chartered Financial Analyst (CFA) charterholder, and Certified Public Accountant (CPA).
Craig is a member of the National Association of Personal Financial Advisors (NAPFA), Fee-Only Network, and XY Planning Network.
Craig lives in the greater St. Louis area with his wife, Ally and son, Hank.