Nobody wants to spend their whole life working. As we age, it is natural to take a backseat and devote more time to passions outside our career – including family, hobbies and friends.
When you are a business owner, retirement means stepping away from a company you may have spent years leading. While you want to enjoy life at a slower pace, it is a hard decision to cut ties completely.
Most retiring owners want to ensure they are leaving their business in capable hands while maximising the money they receive. A good exit plan is crucial to stepping away under the best conditions.
In this guide, we’ve listed nine top tips for retiring in a way that protects the business and your interests.
Retire at the right time
Retiring often seems far away if you’re used to life at the helm of the business. It might be tempting to stay on longer than you should.
However, if your head and heart are no longer in it, or you no longer have the capacity to lead, it’s sensible to step away. Staying will most likely harm performance, making the company harder to sell later.
By choosing the right time to retire, you will maximise value, seize new opportunities and find the perfect person to hand it on to. You will protect your business by ensuring it’s always led by the most capable person and maximise the funding for your retirement.
Fulfil your goals first
When you started your venture, you had a vision. Many owners may want to fulfil their vision and goals before they consider retiring, but that isn’t a requirement. Your goal might even include raising a specific amount for your retirement.
Leaving without regrets by achieving your goals, makes stepping aside easier.
Choose your exit strategy
Before you retire, it’s crucial to pinpoint the route you want to take. There are numerous potential exit strategies to choose from, including:
- Family succession – where you pass the business onto other members of the family
- Management buy-out – where an existing management team buys the business
- Merger or acquisition – in which another company acquires yours to grow their operations
- Sale – selling the company (shares or asset sale) to a third-party buyer
- Liquidation – selling your assets and closing up
- Selling shares – selling your stake to a partner or someone else
Understanding your exit route enables you to manufacture the right conditions. External factors may influence your decision but having an intended path will allow you to plan accordingly.
Document the plan
Once you have chosen a route, document it as part of a formal exit strategy. Having it in writing will be easier to follow when the time comes to retire.
Aim to make your strategy as detailed as possible, including listing the tasks you need to do and when. It will give you a straightforward checklist to complete before you step aside.
This document should be circulated with stakeholders, such as fellow shareholders or investors, to showcase your intentions and increase confidence that the company has a plan to survive past your exit.
Create the conditions
Any exit route requires pre-planning. Once you made your decision, you need to set the conditions that will enable you to leave the business in the best possible position.
If you intend to sell the company, you must work on the business to ensure it is attractive to buyers. You will also want to take steps to maximise the sale value.
If you’re taking the route of a management buy-out or family succession, you will need to train up the prospective new owners, so they’re ready to lead.
Even if you’re closing the business, you will need to think about wrapping up contracts and winding down operations.
Creating the right conditions in advance will ensure a smoother transition when the time comes.
Get your business into shape
You need to hand over the company to your successor in a way that wraps up any loose ends. Doing so will make the transition period more manageable while giving the new owner a relatively blank slate to work with.
Spend time getting your business into shape, so everything that needs to be is closed off.
Examples of actions you may need to complete include:
- Ensuring your accounts are up to date
- Updating documentation so it is accurate and reflects your current processes for example
- Closing contracts that won’t be required after your exit
- Aiming to close out any outstanding HR issues, complaints or other cases – or notifying the new owner of their status
If you are liquidating the company, it is even more crucial to close off everything – including your supplier contracts and accounts.
Understand the new owner’s intentions
When passing on your prized business to a new owner, it’s natural to want to protect your legacy. If you are leaving behind a staff you have grown to know well, you will also likely want to protect them.
Once you leave you will have limited or no say in how the company is run, you can try to understand the new owner’s intentions beforehand. You should seek someone who shares the same principles as you, will look after your staff and has a promising vision for the company.
In some cases, you might be able to add some conditions to the sale that offer the protection you want. You will then leave with peace of mind.
Communicate with the necessary parties
Once you have decided to retire, you need to share the news.
Ideally, you will already have your exit route pinned down by this point and an intended owner (unless closing the company), allowing you to announce a clear course forward. Sometimes, you might need to inform parties before seeking a buyer, especially if they influence who you choose.
There will likely be a list of people you need to inform, including your partners, shareholders, staff, suppliers, other stakeholders and customers. Aim to create a timetable of who you need to tell and when, bearing in mind any non-disclosure agreements you might have and giving people enough time to adjust to the news before your departure, as agreed with the new buyer.
Raise funding
Depending on your chosen exit route, external finance may be required to raise funds to cover the process.
In some cases, you might use seller (vendor) financing in which you agree to loan the buyer a set amount to cover the process, which is then repaid once specific criteria have been met (usually relating to value being realised for the buyer).
While it is the buyer’s responsibility to raise funding, it is worth liaising with them to support the process and keep the agreement on track. They might also need information about the company to secure financing, so provide this promptly when requested.
In summary
Deciding to retire is the start of a meaningful life change. When the time comes, you need to have a strategy that allows you to exit smoothly, protecting your business while giving you everything you need to retire comfortably.
By considering your exit strategy in advance with a route that suits your needs, you will have time to prepare, making stepping away easier. It will also enable you to maximise sale value and find the perfect new owner to extend your legacy.
You will then enjoy retirement without regrets or worries.
We will assist if you are considering retirement and want to leave your business in the best possible position. Our exit planning services find the correct route for you to step aside while raising a sale price that rewards your hard work.