You’ve spent many years building your business from the ground up, working through the highs and lows of entrepreneurship. Now, as you’re nearing retirement age, it’s time to think about what will happen to your business when you’re no longer working. And while you might have been planning your retirement for many years, there may come a time when you need to retire earlier than expected—whether it’s because of health, a sudden downturn in business, or a family emergency. Here’s what to do if you’re facing an unexpected exit.
Evaluate Your Financial Situation
The most important thing to do when facing an unexpected—and potentially early—retirement is to look at your financial situation. First, review the non-retirement funds you have available. Especially if you’re retiring early, you may need to depend on your liquid assets and non-retirement savings accounts to get by until age 65.
How does your current financial situation compare to where you want to be at retirement? What gaps do you need to fill? Will you have access to your retirement savings accounts right away or will you need to supplement your income in other ways? You may consider claiming Social Security earlier than planned, but keep in mind that your payments will be larger if you’re able to delay, even for a few months.
Not only should you consider where you are in terms of savings goals, but also in terms of expenses. Is there debt you still need to pay off? If so, you may consider consolidating or refinancing that debt to ease the financial burden. Do you have a plan for your health needs? If you’re younger than 65 you won’t be eligible for Medicare, so it’s important to research other health plans available to you, especially if your early exit is because of a medical issue.
Once you’ve taken stock of your financial health, you can make informed decisions about what’s next for your retirement and your exit from your small business.
Plan Your Exit
Depending on your age and the size of your company, you may already have an exit plan in place. In that case, take a look at your plan to figure out if it still works for your situation. If you don’t have an exit plan, now is the time to set one.
There are a few options for exiting your business, including:
- Liquidating the business
- Selling the business to someone you know
- Selling the business to another business
- Selling the business in the open market
It’s essential to consider the state of your business before planning your exit strategy. Each strategy has its pros and cons. Liquidating your business can be the quickest way to exit, especially if you’re dealing with financial strain, but it’s not always the most profitable plan. Alternatively, you may consider selling your business to a family member or close friend who knows the business well for an easy transition—but be aware that selling to someone you know can be complex and has the potential to put a strain on your relationship.
Consult a Trusted Professional
Above all, consulting a financial professional is the best way to handle an unexpected or early retirement from your small business. Financial professionals can help you evaluate your financial situation and your needs moving forward, as well as educate you on all potential exit strategy options and pitfalls. Having a trusted professional in your corner, especially involving a small business transition to family and friends, is a great way to get an outside, objective perspective on your best options for retirement.