When it comes to retirement, many business owners will plan on selling as their exit strategy. If selling your business is your retirement plan, there are a few things you need to consider before you talk numbers or make plans.
It is important to have an accurate understanding of how much your business is worth and how much money you need for retirement. Calculating the value of a fire and security business can be tricky since there are multiple factors that come into play. It’s important to know how much you can actually earn from the sale of your business before planning too heavily on a certain amount.
Here are some things to consider before you exit to make sure you are prepared to start your retirement the right way.
How Much Is My Business Worth?
First, get an understanding of how much your business is worth by comparing it to similar businesses on the market. Consider the revenue and profits, assets, customer base, industry trends, competitive environment, and other factors that will influence its value. It can be hard to find this information on your own. It can be even harder to objectively consider the value of something you’ve poured so much of your time and energy into building. So, consider enlisting the help of a broker from the beginning of this process. Just make sure it is a broker with industry experience to be sure he knows how to correctly evaluate your business’s worth.
How Much Money Do I Need?
Second, think about how much money you need to retire and come up with a reasonable asking price. Consider your personal financial goals and lifestyle requirements. If you plan to stay in the same area or move somewhere else, factor the different costs of living into the equation as well.
How well you planned for retirement throughout your career and how much you already have saved will determine how much pressure there is on the sale of the business. If you are counting on the money from your business to support most or all of your retirement, you will want to work with a professional to make sure you get the best offer possible. Unfortunately, the amount you need does not change how much you can sell your business for, but it can influence how you enter negotiations.
How Much to Sell My Business For?
Third, be realistic when setting your asking price for selling the business. You don’t want to set the price too high and scare away potential buyers, or too low and lose out on the chance to maximize your return.
Rather than declare your asking price right away, have a range in mind and enter negotiations with a solid understanding of how you came to that valuation. Think outside the box when doing this: there may be other things you could ask for during the sale beyond money that could make your retirement easier. Maybe you’d like the option to stay on part-time as an advisor and keep a little money coming, or perhaps there are things that belong to your company that you would like to keep personally afterwards like a vehicle or certain tools. Even if you do not plan to work with a broker throughout the selling process, a professional valuation will help you know how much your business is worth and give you confidence in negotiating its sale.
What Is My Plan After I Sell?
Finally, make sure you have a plan for what you’ll do after selling your business. Consider the tax implications of any transactions and get professional advice if needed. Weigh your options such as transitioning to part-time work or life safety consulting in order to maintain a steady income when you retire.
Your retirement plans can also influence which types of buyers you should look for as you prepare to exit. If you want to remain involved in your business and ease into retirement, you will want to find a buyer who is open-minded to that. If you are ready to make a clean break, the buyers’ plans for your business may not be as important to you. The process for transferring the money to you post-sale is also important. If you need all the money upfront, only entertain buyers prepared to pay you appropriately.
Have More Questions? Contact AFS Today!
If selling your business is part of your retirement plan, it is never too early to learn how much your business is worth and how much you can reasonably expect to sell it for when it’s time. By taking the time to understand the value of your business, assessing your financial situation, and having a plan for what comes after selling, you can ensure that you get the most out of your exit strategy.
If you want to guarantee you will be able to sell for the right price at the right time, reach out to Acquisition and Funding Services today! Over the last three decades, managing owner Rory Russell has helped many owners successfully transition into retirement after selling their fire and life safety businesses. He can help you do the same so you can enter your well-earned retirement with financial security.
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