By Important considerations before you sell off your business as retirement
Did you know that some people started a side business so that they could sell it after retirement to earn a retirement fund? This especially works for those who do not have a large sum of money to regularly pump into their retirement fund. It could also be that they want to ease themselves of any business responsibility once they are out of work. What if your trump card leaves a bitter taste in your mouth – turns into a joker when you least expect?
Many people will argue against retiring from a business simply because you want to step away from active money making. Actually, some of the richest people in the world are still running their businesses well into their 70s, 80s and even 90s. Before you sell off your business to earn retirement package, it is important to make the following considerations;
Is your business ready for sale?
You might be operating a successful business whose greatest asset is its owner. Have you ever wondered what would happen if you were not there at your sole proprietorship for a day? If the customers are used to dealing with you, then the sad reality is that your business might collapse in your absence.
Some businesses that are modelled around older technologies may find it hard to survive in an environment where new players enter the market with new technologies. While such businesses might stay afloat out of customer loyalty, this might take a different turn if the original owner is not there. A person who runs a movie rental shop may find that their customers are old friends and contacts from their past. With many digital movie platforms available for the tech savvy generation, such businesses may just be waiting for the owner to retire for them to collapse.
What the real value of your business?
There are many factors that play a role in establishing the monetary value of any business. This might come as a shock to someone who expects a certain high amount but potential buyers keep quoting way lower.
It does not matter that you have spent sleepless nights and shed blood to build a business; all this must translate to real money value. Getting the actual value of a business requires research but it pays to do it sooner rather than later. As with a house sale, you can gain more value with upgrades and investing in leading technology in the industry you are in.
Are you ready for a sale right away?
What if someone came up to you with a clear interest in wanting to purchase your business? Would the business be in the state at which you want to hand it over to someone else in exchange for money? No matter the time you feel is left between now and retirement, it is important to get ready immediately. What really does getting ready entail? In the business sense, this means working on your track record – put your financial records in order and cleaning up the balance sheet. Most potential buyers may shy away from a purchase if they get to know that a business is in debt and has no control over its assets.
Do you have a viable selling plan?
Consider the time leading up to the sale as the preparation stage for handing over. This is clearly a big project that would do well with a checklist. What is it about the premises, customer profiles, business records, and inventory that must be cleaned up and made transferrable? If there are legal documents required to effect the transfer, then they should be drafted early and cross-checked for errors. Liaise with your financial manager to decide on the best sale; share sale versus asset sale. If a share sale is the better option, consider the fact that you need to adjust the nature of business registration to facilitate a transfer part of the ownership.
Planning might seem like such a basic task in the process of selling a business until you come to the table just to realize that all that is sellable is the fixtures and inventory. Well, a business has to be worth more than what the naked eye can see. What about the value of the existing clients? Businesses spend millions in advertising budgets so it must cost something to have a few clients to your name. The decision to sell is the first step in an uncertain direction. You will definitely save a lot of negotiation time and present tangible supporting evidence if only you could attach value to what you think your business is worth.
