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How to Retire Happy from Your Small Business

An older couple walking on a grassy path toward the water.When planning your retirement, there are multiple factors to consider. When retiring from your own business, your decisions are all the more important because they affect multiple people. Whether you decide to continue the business or sell the business can also affect how much income you have throughout retirement.

Let’s take a look at the types of questions your CPA may ask during your initial discussion, then we’ll give you an overview of the first steps you can take to retire happy and financially healthy.

Questions Your CPA May Ask

Try to prepare as much information as possible before meeting with your CPA. Thinking about these questions will make the discussion go much more smoothly.

  • Are you selling the business or passing it to someone else?
  • If you’re selling, do you want us to help with business valuation?
  • Do you have an idea of someone who will be taking your place?
  • Are there any processes that you could be automating?
  • What do you wish your business was doing that it is not currently?
  • Do you want us to reach out to the new owner of your business, in the event you plan to sell?
  • Do you still want to be involved in any capacity in your business?
  • Are there areas where you would like us to help reduce business costs?
  • Are all your loans paid off?
  • What steps can you take in your business to maximize the sales price?
  • Have you engaged a business broker or do you have a way of lining up prospects for purchasing your business?
  • Do you have a good estimate of the potential sales price of your business?
  • Do you have a financial advisor to plan your investments for retirement?

Is there anything else on your mind that we have not covered? Bring a list of your own questions as well!

Steps Toward Retirement

1. Create a Timeline

Being as proactive as possible will bring you closer to your dream of retiring happy from your small business.

When you are looking to retire within a five to 10-year timeframe, it helps to set milestones along the way. The first milestone you can set would be to get rid of as much debt as possible. Once you feel comfortable with the payments, and the percentage paid off, the next milestone would be to minimize expenses and put as much into your retirement accounts as possible.

Now, project a reasonable income needed in retirement for spending, to minimize debt and maximize savings. Then, create a projected budget for income and expenses throughout retirement.

You might not want to think about it, but you should also plan for post-retirement, which includes expenses associated with long-term care or your estate.

Another milestone idea includes setting aside a week to communicate your plans with your loved ones and business partners.

2. Passive Income

Narrow down your options for passive income throughout retirement. A few options to consider include investing in rental properties, re-allocating dividend stocks and possibly even making money from a hobby.

3. Put a Succession Plan in Place

Your CPA will work with you and your team to start putting your succession planning steps into action.

You can get a jumpstart on the process by outlining who will be the best person to take your place when you retire, and include any monthly, yearly or daily tasks you can summarize for your successor. If there is no family or internal successor and you plan on selling the business, pay special attention to your team dynamics and processes to support future business success.

This is also the perfect time to start thinking about automation. Are there any processes that may be better automated, such as batch reporting, sending invoices or customer touch-points you currently deliver personally?

4. Build Business Value

It’s important to spend these next five to 10 years building business value, especially if you’re selling the business. As your dedicated CPA, it’s our job to track the performance of your business and to add value as opportunities arise.. Ask us to begin the business valuation process 5-10 years before you sell or transition the business.

Take this time to focus on the innerworkings of your team and ensure everyone is ready to take on their new roles once you’ve successfully transitioned out of daily operations.

You can also look into diversifying your clientele and investing in higher-priced ticket items and services that will yield increased dividends in the long run.

Of course, there are myriad ways in which you can prepare for retirement from your small business. Let us know how we can help answer any questions you may have in order to start the process.

Learn more about WhippleWood’s advisory services including Business Valuation.