You may view your business as a major retirement asset, a nest egg you are personally responsible for every day, but do you even know what it's worth? What do you want to do with the money once you sell? Travel? Start a new venture? Create a foundation?
It's these types of decisions that you need to think through to have a solid retirement plan.
"In many cases, business owners have underestimated the value of their business rather than overestimated it," says Dennis Schwartz, vice president of McDonald Investments' The WealthCare Group. "They have not attributed some value to a piece of their business that a potential buyer might be interested in. Other times, they overestimate the value. It's important to get a good handle on the value of your business years before you are thinking of selling."
Without a firm value in hand, it's hard to plan to achieve your goals because you don't understand your total financial picture. Understanding where the money will ultimately go is also important.
"What's the money for?" says Jeffrey Katz, vice president of The WealthCare Group. "How much do you need to support your lifestyle? Some people can't get that just by selling their business. When they compare how much income their business generates and compare that to the 4 to 6 percent an investment portfolio that preserves the principle might generate, they are disappointed. If they are not offered what they think the business is worth, then they can continue to run the business and pay themselves. There's no harm in that.
"Business owners just need to sit down and write out their ideal walk-away situation, something that has goals that, if met, they'll be happy. They can work toward that, and if the goals are met, they can walk away. No one wants a financial plan, but a financial plan is nothing more than a map."
"They most likely have a plan for their business; why wouldn't they have a plan for their own financial well-being?" says Schwartz. "I think a business owner needs to have a good idea of what they see for their business in the future. What part does the value of their business play in their overall financial plan?"
How to reach: The WealthCare Group, (800) 828-3538