Business planning for retirement

Posted 3/14/22

Perhaps you have heard of the “great resignation” or other issues of workers leaving the workforce recently. Business owners planning for their own retirement are not exempt from the desire to …

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Business planning for retirement

Posted

Perhaps you have heard of the “great resignation” or other issues of workers leaving the workforce recently. Business owners planning for their own retirement are not exempt from the desire to perhaps join their ranks. In fact, sometimes business owners may feel stuck. Maybe they would like to resign or retire, but can’t due to responsibilities to customers and employees, leases, and vendors.

The latest figures from January showed that 4.5 million people voluntarily left their positions last November. Job Openings and Labor Turnover Survey, also known as JOLTS, reports that over 20% or nearly 33 million people left their positions since April 2021. The COVID-19 pandemic also drove millions of workers into early retirement. According to the Federal Reserve Bank of St. Louis, more than 3 million additional people retired. An article in Kiplinger’s at the height of the pandemic states “Covid-19 weary business owners need a succession plan.”

Just as in financial planning when advisers coach their clients to plan for the inevitable, so too should business owners. This is why the State of Colorado Office of Economic Development and International Trade, along with a host of other advisory groups and the Exit Planning Institute, launched a Business Owner Readiness Survey to help business owners determine how to exit from their business.

There are 10,000 baby boomers turning 65 every day and this generation owns 51% of privately held businesses in the United States. In recent surveys, 3 out of 4 business owners “profoundly regretted” their decision to sell within one year of exiting due to lack of “readiness.”¹

Privately held businesses headquartered in Colorado could benefit from creating a succession plan. Here are some tips to help business owners plan for their future:

• Create a contingency plan in case of illness or premature death.

• Form an advisory team with your attorney, CPA, and financial adviser.

• Consider adding industry experts, outside advisers and a family member to your board.

• Review the financials. Know your income, expenses, assets, and liabilities.

• Consider a business valuation study.

• Understand your business structure by who are owners and how you file your taxes.

What are your roots, business plan and future goals? These may help you identify a suitable transition.

Business has a better success rate and smooth succession when you have time to plan, choose your advisers and develop your successors. No one likes an emergency exit. Planning ahead of time to be prepared will help in your day-to-day operations as well as give you a roadmap to guide you through the next steps.

Our state economy thrives when businesses thrive. There are resources to help you improve your readiness and advisers to help with financial reviews and valuations. Now is the time to prepare for your own future, even it is many years away. You don’t want to be caught off-guard with an emergency, and not be able to protect your legacy, family and employees.

1. State of Colorado Office of Economic Development and International Trade

Patricia Kummer has been a Certified Financial Planner professional and a fiduciary for over 35 years and is Managing Director for Mariner Wealth Advisors, an SEC Registered Investment Adviser.

 

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