You may not talk about it much with others, but the older you get, the more you think about it…
Your business is your retirement plan.
You’ve poured your heart, soul and money into your business and invested very little elsewhere.
You understand relying on the sale of your business to fund your retirement is a bit of a problem, but “it is what it is.”
In the business world, your situation is known as asset concentration. It’s one of the most common personal finance issues for business owners.
Before laying out some ideas to address your situation, let’s look at what you are facing and why relying on your business to fund your retirement is problematic.
Why Relying on Selling Your Business to Fund Your Retirement Is Problematic
1 Businesses are hard to sell, especially if your business is fully dependent on your day-to-day presence. According to the Exit Planning Institute, roughly 70%-80% of businesses put up for sale never sell. When businesses do sell, it’s often for a lower value than the owner expected.
2 Every business is different and buyers are going to apply discounts to your valuation for things like owner dependency and customer concentration. Therefore, if you’re estimating your company’s value based upon industry statistics or conversations with other owners, rather than a third party appraisal, you might be surprised to find out your business isn’t worth as much as you think.
3 Trying to ‘time’ the sale of your business with your readiness to retire, and getting ‘full value’ for your business, is nearly impossible. There are simply too many factors involved that are outside your control:
- Is your business ready to sell?
- Are your business and your industry growing?
- Is there a willing buyer for your business?
- What is the general state of the economy?
4 Without a personal financial plan, you really don’t know how much money you’ll need to retire.
First Things First: Determine “Your Number”
One of the things you can do about asset concentration is build up other assets. If ‘retirement’ is your goal, then those other assets should be liquid and marketable financial assets.
It’s not too late to get started.
As they say, “The best time to plant a tree was twenty years ago. The second-best time is now.”
If this is something you’re interested in, the first thing to do is put together a personal financial plan.
The end result of this planning process will be the calculation of “your number”: the amount of money you need to fund your desired retirement lifestyle.
You’ll find that having goals is a powerful motivator, and a written financial plan will make your goals feel real and tangible.
Get Started Now
The cost of waiting any longer to begin investing is high, primarily because you need your money to start working for you now. Money works for you through the magic of compound interest, or compounding: earning money on your money.
The magic of this caught the attention of Albert Einstein, who proclaimed, “Compound interest is the eighth wonder of the world. He who understands it, earns it. He who doesn’t, pays it.”
So get your money working for you, now!
You’re Not Alone
Everything we’ve discussed above feels overwhelming to most people.
But for us, all this financial planning and investing is smack-dab in the center of our wheelhouse. We knock these opportunities out of the park on a daily basis.
And we’ll be right by your side for the entire process.
No judgment. No pressure. No minimums.
We love entrepreneurs and understand your situation.
Part of our job is to educate you on the financial planning process and take the mystery out of financial markets.
There’s no point in waiting a moment longer.
Let’s get started!