Entrepreneurs are innovative, self-starters and motivated beyond belief. We, in economic development, marvel at your tenacity and sheer will-power.
When starting a business, you have created a step-by-step plan on how to begin, when and where to start, detailed your business plan with extensive projections, and forecast the possible highs and lows of your new venture. You have detailed every phase of your project, and what needs to be done to make the next phase a success. This commitment to success is awe-inspiring. Often, you spend so much time and energy planning and cultivating your “baby,” but most times very little effort at planning for your exit.
It may seem counter intuitive to plan for the exit in the beginning, but every great plan should begin with the end in mind. Ultimately, every entrepreneur wants to bring their business to a level of success and profitability so that, at some point, you will be able to move on to your next project or phase of life. For this to happen, you must put time and effort into working on your exit strategy, keeping the end in mind.
Will you be able to walk away when you want? You may find it surprising that 40 percent of small-business owners have no real retirement-savings plan. This could be due to the fact that most of the financial resources have been funneled back into the business either for survival or growth, sometimes both. Don’t let yourself get caught in this cycle; always be planning for your future.
Most small-business owners will tell you they have a retirement plan — the sale of their business when they reach a certain age. I would argue that is a bit risky, to say the least. Your business’s value can shift from high to low depending on the economy, the industry, and the time in which you are ready to sell. I am sure many do just fine with this way of retirement planning. However, I am sure others do not.
Many might say well, there is Social Security. That might be true and that might not be true. How do we know for sure? The Social Security system is an uncertainty and one should not just depend on that as a backup, in most expert’s opinions. Just as one should not depend solely on the sale of his or her business. If we have learned anything in this world, it is important not to put all our eggs in one basket.
So, as a business owner, where do you start? To begin with, run your numbers. How much do you think you will need to live in retirement? Use those projection tools you used to start your business. Figure out what you will need later in life and have a budget. Just like you are the expert in your industry, find an expert in the financial-planning industry. If you haven’t talked to a financial planner, it might be a good idea to start the conversation. Let him/her guide you and offer input. A plan can be developed that will include diversification and managing your risk, which is the name of the game.
Diversifying is the key. At the Small Business Development Center (SBDC), we want to see you succeed at every stage of your life and business. We encourage you to take the necessary steps to start planning for succession. Attend workshops, set up a meeting with a financial advisor, and/or conduct research online. Do what makes the most sense for your situation. Work with a professional who will customize an approach that will help you reach your goals. Be prepared, ask questions, and be organized. Sort of the same way you were when you started your business, do that for exiting your business.
In order to help you with those plans and bring awareness to retirement, the SBDC at Onondaga Community College is offering workshops regarding this topic. One is “Build Your Business, Build Your Wealth: Retirement Options for Small Business Owners” and the second is “Succession Planning for Small Business.” Both of these workshops will be held Fall 2018.
Remember, it is never too early to start planning for your retirement. After all, you deserve to retire. You worked hard for this and you should enjoy the golden years of golfing, traveling, and spending time with loved ones.
article published in the BJNN on September 3, 2018
Melissa Zomro Davis is an Advanced Certified Business Advisor at the SBDC located at OCC Contact her at email@example.com