Many of our clients operate their own businesses or have done so prior to retiring. It should go without saying that the process of selling a business to fund retirement is a significant decision that requires careful consideration. Here are five important items that business owners should consider when thinking about selling their business to retire.

(1) Financial Readiness

Before selling a business, it is crucial for business owners to assess their own financial readiness for retirement. This will involve understanding the value of the business (that is, the market value, not what you think it is worth), outstanding debts, personal savings, and superannuation. It also involves identifying your future financial goals, both for lifestyle in retirement and also for any financial assistance for family. The guidance of a qualified financial planner can help you with many of these aspects, as well as how to fund your goals once you have sold.

(2) Business Valuation

A proper valuation of your business is essential to determine its worth in the market. Business owners should consider using the services of a professional appraiser or business broker to accurately assess the value of the business. This valuation will not only play a critical role in negotiations with potential buyers, but also identify if you have sufficient wealth to achieve your post-retirement objectives that you identified in the first step.

(3) Succession Planning

Business owners need to plan for the future leadership and management of their business after they have departed. Establishing a clear succession plan, whether that be family, promotions from within the business, or finding an external successor, is essential for a smooth transition and to maintain the business’s stability and growth. It could also enhance the value achieved on sale. Succession plans often need to start well before a sale is considered, with many experts considering a lead time of five years minimum.

(4) Tax Implications

The sale of your business has significant tax implications that can impact the amount of money you receive from the sale. Seeking advice from tax professionals can help in understanding and planning for the tax obligations and potential strategies to minimize the tax burden. In particular, small business owners should discuss with their accountant the ability to utilise the attractive Small Business Capital Gains Tax concessions, which can be used to reduce capital gains tax on the sale of a business by 75% to 100%.

(5) Emotional Preparedness

Selling a business can be an emotional process, particularly for owners who have invested significant time and effort into building their business. As a business owner, you need to prepare yourself emotionally for the transition, and to have a clear vision of how you want to spend your years in retirement. If you are unsure, then discussing this with your family, peers, and your financial planner might help uncover some options for you to consider.

Retiring from a business involves careful planning and consideration of financial, operational, and emotional factors.

By seeking appropriate advice from the right professionals and addressing these key items, business owners can position themselves for a successful sale and a fulfilling retirement.

If you are business owner contemplating retirement, why not book some time with one of our highly qualified financial planners to see how we can be of assistance.