Consider this statistic: Every three minutes a baby boomer retires from business. Other members of this generation, which is second in size only to the millennial generation, may have not retired yet, but they are definitely thinking about it.
Still, many will work into their 60s and perhaps even their 70s. Others will pick up part-time work after retirement. For all boomers, though, the choice of how and when to retire may be most difficult for business owners.
These baby boomers face inevitable questions, including whether to sell their business or set up a succession plan that involves their leaving management entirely. Some business owners may even choose a successor who allows them to continue on in a diminished role, a scenario which may remind boomers of the familiar 1980s Clash anthem, "Should I Stay Or Should I Go."
It's a given that boomers have a large role in the business world. More than 38 percent of businesses today are owned by boomers which accounts for an estimated 4.5 million firms. If you happen to be one of the business-owning boomers who is considering when and how to retire, here are a few steps you can take to start preparing for the transition:
Create a Succession Team
Prior to entertaining a sale of your business, or passing it on a successor, you may want to work with a professional organization on an exit plan. Depending on the size of your business, a succession team could include your attorney, a CPA firm and a banker.
By working with this team, you can begin the process of creating a roadmap to retirement. This roadmap will help guide you as you prepare for all aspects of retirement, from addressing your personal needs and aspirations to evaluating financial and legal issues.
Identify Weaknesses and Make Improvements
A key to retiring with confidence is to conduct "sell-side" due diligence on your own company. Imagine yourself buying it or assuming the role of president. You have an opportunity at this point in the process to look for weaknesses and begin to shore them up.
Asking the right questions early will determine your success going into retirement. Is your information technology system as good as it should be? How is your relationship with customers? How strong is your management team? What do the company's assets look like? What is the prognosis for your market? These are questions your chosen successor or future buyer will be asking. By handling these issues early on, you can make lasting improvements. You can fix the accounting system, transfer to a cloud-based IT platform, ensure the accuracy of customer, contractor and employee contracts, improve financial reporting capabilities and add protections to intellectual property.
The succession planning process takes time. Transferring or selling a business can take anywhere from one to three years, sometimes even longer. If retirement is on your current agenda or even a few years down the road, it may be time to start getting your business in order for a future transition.