By Adam Stypula, Market President, Park National Bank
Most people want to retire someday, but are you prepared for this moment? From mapping out your successor's transition to identifying your own personal path upon retirement - and taking all scenarios into consideration - it's an extensive process.
Here are a few items to consider when planning your retirement.
Business owners should start thinking about preparing for retirement as early as possible. If you put a number on it, look to start at least five years ahead of the sale. That means setting up the structures and plans to maximize the value of your business. Getting items like your margins and expenses in order is critical, as is building profitable revenue growth. Your mindset should be to sprint to the finish line and not coast into retirement.
There's so much to consider; it's hard to do it properly and efficiently if the planning process doesn't start early. Doing so ahead of time allows you to get a measure of the true value of your business, and can help you avoid the pitfalls of having to sell your business quickly or in an emergency.
Having a leadership team ready and in place is also smart, and not only does it increase the number of possible buyers, you may also find your buyer from this group. Additionally, getting the right advice about how to structure the sale well ahead of time can allow you to implement tax strategies that can be beneficial.
When it comes to your leadership team, look to hire the best people you can afford. Don't be afraid to give them responsibility and the ability to make decisions, and make sure they have a deep understanding of your business.
If a member of your leadership team will be a successor, ensuring they are prepared is vital. Many businesses fail when handing off to someone because they were simply unprepared to run the business. Make sure they are ready to take over the business you've built and put your heart and soul into. Progressively giving them more responsibility and training them to work in all facets of the business can help ensure the transition is a positive one for all parties - including yourself.
To test their readiness, go on vacation, turn off your phone and see how it goes, or don't stay as engaged while you're in Florida for the winter. It gives them a chance to learn while you're still available for emergencies, and your successor isn't immediately thrown into the fire.
Most business owners are not as excited about retirement as their employees. Building the business and being entrenched in its growth is in your DNA, and it can be hard to walk away.
But if retirement is coming, give yourself something to look forward to in your retirement years. Find a handful of hobbies and pay attention to seasonality. Simply sitting on the couch all winter won't work.
It can be difficult mentally to transition to retirement, so if you're five years away, start taking the time to find that new passion project.
Consider some part-time work, or find an organization where you would feel passionate about volunteering. Invest in the tools you'll use or the toys you want while you've still got the income, or think about giving back to different organizations.
It's a totally different pace after stepping into retirement, but finding something you love to do and keeping yourself occupied is valuable for a fruitful retirement.
Utilizing a team with a deep understanding of your business and a long-term relationship with you can lead to success down the road. Your CPA, attorney, and financial institution should all be dedicated to working in tandem to assist you and help you reach your goals.
While we often focus on the short-term goals regarding the success of our business - quarterly numbers, rapid change, etc. - effective succession planning is long-term. It takes careful, thought-out planning, but business owners who plan and prepare create the opportunity for the most prosperous transition to retirement.
