Five steps to selling your business when you retire

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All entrepreneurs will have to leave their businesses, either through retirement or starting a new venture. Some leave it to a successor, others sell it. Whatever you choose, it’s never too early to start planning.

Selling your business can be a complicated process. From how to sell to what to look for in a buyer, it can be a daunting task for a small business owner transitioning to another business or retiring. Here are five things to consider when selling your business.

1. Choose your preferred type of business sale

There are a few different ways to sell your business, including an outright sale where a buyer buys your business for the sale amount and ownership is transferred. A step-by-step sale is similar to having a mortgage and the sale is financed, providing a flexible option to transfer a business. Others enter into a lease where the buyer and seller enter into a contract outlining the terms and payments to have temporary rights to the business. Being an increasingly common trend Employee Stock Ownership Plans (ESOPs)enabling employees to take ownership of part or all of the company they work for and making succession planning easier.

2. Appropriately value your business

To get a fair return on your business, you want to get a good valuation first. To get your business valued, you need a certified appraiser who will perform a valuation based on your preference. For example, some companies use an asset approach, where total business liabilities are subtracted from the total value of all assets. Others will use a market approach that compares your company to other similar companies that have recently been sold.

3. Create an exit strategy

The transition period can be a fleeting time for many small businesses. Having an orderly transition plan in place that incorporates supply chain considerations, financial obligations, and client or customer needs are important considerations for avoiding business disruption. Depending on whether you leave your business to a successor or sell your business entirely, your exit strategy may need to provide them with training and resources.

4. Find a business broker

As a small business owner, you have experience running a business, but you are most likely not an expert at selling your business. That’s where a commercial broker comes in. Finding the right business broker, who ideally has experience in your local area and industry, can help sell your business. The International Commercial Brokers Association (IBBA) can help you find a business broker.

5. Prepare financial and legal documents for estate planning

To sell your business, you need accurate financial records from the past few years. You will also need to research the legal documents required to sell a business in your area, which may include a will, health directive, and power of attorney.

These steps emphasize the importance of keeping your business organized at all times. Make sure you keep updated financials so you’re prepared to see your business when you’re ready.