Retirement Planning for Business Owners: What You Need to Know When Selling Your Business for Your Retirement

Thinking about retirement? If you’re like most business owners, the bulk of your net worth is tied to your business. Of course, you have savings and investments, but to really retire comfortably, you’ll need to unlock your most valuable asset. 

In this guide, you’ll learn about retirement planning for business owners, the importance of having a specialty business financial advisor, and why Interactive Wealth Advisors are a trusted resource for entrepreneurs in Oregon and across the Pacific Northwest. 

About Interactive Wealth Advisors

When it comes to selling your business, there are a lot of things to take into account. 

That’s where Interactive Wealth Advisors comes in — we’re a company that helps small business owners and not so small sell their businesses and understand the sales process. 

We have over 15 years of experience in the industry, and we’re here to help entrepreneurs take their business exit strategy to the next level.

What is Business Owner Financial Planning?

When selling your business, it’s essential to make sure you’re taking the proper steps to ensure a smooth transition. 

One of the most critical steps is financial planning. This process is different than talking to your accountant or trusted family member about your plans. When creating your financial plan, it encompasses evaluating your personal and business assets. 

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A detailed review of your tax returns and financial information makes the company attractive to prospective buyers. You need to ensure the business has enough money in reserve to cover unexpected costs as they arise while also ensuring that future growth potential isn’t inhibited unnecessarily. By incorporating financial planning into your selling process, you can guarantee a successful exit that meets your personal and business goals.

The key thing to remember is that market conditions change rapidly and affect your business’s ability to sell. The recent pandemic and the Great Recession come to mind as events that cut the sale price of many companies in half or more. That’s why you need to build flexibility into your retirement plan so you can sell your stake during a strong market or possibly work longer until the storm passes and conditions improve.

You don’t want to be that owner who is put into a distress sale situation. For example, if you wait until the “last minute” to exit your business when you’re ready to retire, it gives the impression among potential buyers that they have more room to negotiate. Your desire to retire will be seen as a leverage point to exploit for a reduced price.

Do You Need a Financial Advisor as a Business Owner?

Retirement is a big decision; an entrepreneur must be prepared for their business’s sale. Selling a business is a very complex process that requires careful planning and the help of a knowledgeable financial advisor. An experienced business financial advisor can help you with several important aspects of the sale, such as preparing a marketing plan, structuring the deal, and ensuring you receive the most value for your business. They can also provide valuable advice on the business sale’s estate and tax planning aspects.

financial advisor for business owners

For example, an experienced financial advisor will help you consider if and how you should use the sale proceeds before you receive them. Does a Roth conversion(s) make sense using tax bracket stuffing? What about using a Donor Advised Fund the year of the business sale to cut your taxes from the sale? If so, how much and at what structure is appropriate?

Mistakes a Business Financial Advisor Can Help You Avoid

There’s no doubt that selling your business is a formidable task, but the process can be more manageable with the proper preparation and help from a business financial consultant. Before you even consider selling your business, make sure you have a plan. This will help you stay focused and on track with what’s important and not. Once you have a plan, do your research to know exactly what needs to be done to sell your business in a timeframe that fits your needs—for most owners, this is usually 12 months or less.   

You’ll want to be prepared to offer your business at a fair price and have a realistic range of the business’s worth to different types of buyers. Speaking with an advisor who knows what strategic buyers want versus financial buyers is critical to maximizing value and closing deals quickly. That’s why it’s essential to craft the perfect pitch for each type of buyer and increase your chances of success.

One of the preparation’s most significant benefits is saving the business owner millions in unnecessary taxes. We’ve seen countless cases after the fact where the owner could have walked away with an extra $5 million plus using a simple but effective charitable trust strategy that provides income in the future and cuts the owner’s capital gains today. However, these take time to set up, and if the owner waits a few months before closing or in the heat of negotiations 9 times out of 10, the owner won’t have the time or capacity to implement them before the sale is complete. 

Why Business Owner Planning is Critical for Your Future Retirement

Trying to “build the airplane as you’re flying” rarely works well. You only get one shot to get it right to maximize your business’s asking price and secure your retirement. That’s why planning and due diligence is critical for success.

You need to stay on top of the changing business environment so you can make informed decisions about growing or shrinking your business to maximize its value. Make sure you have an effective plan in place well before you ever consider going to market that is reviewed and updated regularly. By taking the time to plan for a future eventual sale, you can minimize the chances of costly surprises down the road.

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Additionally, be sure to consider all your costs and expenses when creating your marketing budget to sell your business. This will help you create a realistic estimate of what your exit plan will cost. Finally, make sure you have a solid plan for yourself and your family. What exactly will you fill your time with now that you’re retired? Having a purpose in retirement can help reduce the stress of the transition and make the process effortless.

We’ve seen, and you’ve probably heard of, owners having a severe identity crisis and seller’s remorse 12 to 18 months after the sale. Yesterday they were a captain of industry; today, they’re a retired guy playing golf–poorly. They miss the days of running their business, interacting with colleagues, and feeling a sense of accomplishment. Finding your new mission in life will be critical to make sure you don’t experience those low points.

Where Do You Start

The first thing to realize is that selling your business is going to take longer than you think. If you don’t care about getting a great deal, minimizing your taxes, or taking care of your employees and customers, you can sell your business pretty fast. However, if you’re reading this article, I doubt you’re in that camp.

You’ll need a proven process to address the three stages to all successful owner exits. The first stage is fine-tuning the business. Is your business firing on all cylinders or not? If not, what things can you do now to improve your Key Performance Indicators (KPI) to make buyers want to fall over themselves to own your company? This stage can take months or even years to complete.

financial planning for small business owners

You’ll need to use a proven to process to analyze and address the twelve key areas that can torpedo a sale that otherwise would be successful. For example, is the business overly dependent on you, the owner, or a few customers for its success? If so, a buyer will see that as risky and lower their offer. See our article on scaling your business to learn more.

The second stage is owner preplanning so you can maximize the sale for its after-tax benefits. We’ve been discussing this stage in this article. As you can see, getting the most and keeping it is critical. 

The final stage is going to market. Now that you’ve completed the first two stages, you’re ready to open your doors and let the buyers kick the tires. Unfortunately, most owners start at the final stage, shoot themselves in the foot, and end up abandoning the sale or settling for a price that won’t fund their retirement. Don’t be that guy!

You’ll need to decide who and what approach will work best to get the most buyers with readily available cash knocking on my door and outbidding each other in your favor. See our article on going to market coming soon to learn more.

Selling your business is a huge decision that can significantly impact you and your family. As you can see, it’s important to start planning for this process well in advance, so you can make the most of the sale and minimize any potential risks as follows:

  1. Assess your business’s value and understand its strengths and weaknesses. It would be best if you did this annually to ensure that your business runs at its best.
  2. Identify personal planning strategies to minimize taxes and maximize your sale proceeds. These strategies take time to set up, so it’s essential to start planning for this process months and sometimes years in advance.
  3. Develop a marketing plan to help you reach your target audience and create a sense of urgency for the potential buyers.

How Can Interactive Can Help

Whether you’re thinking about selling your business or not, it’s one that needs careful consideration. That’s where our team comes in. We have years of experience helping small and not-so-small business owners determine if selling their business is right for them and when. It’s a complicated process and decision that needs the proper due diligence and care before any undertaking.   

In addition to the major services discussed below, like business valuations and tax planning, there are also some small but critical factors to consider. For example, we’ll also need to consider: a pre-sale consultation, a non-disclosure agreement, a confidentiality agreement, the due diligence process, any outstanding lease, and finalizing the deal paperwork.

Business Valuation

All business sale discussions should start with estimating what the business is worth. A business valuation helps with this key first step. A valuation can help maximize your asking price and ascertain whether it is time for a change at the helm or an expansion into a new product line.

In order to arrive at an accurate figure, an independent professional should be consulted with experience in this field. After all, no two businesses are exactly alike! 

retirement tax planning advisor

By understanding what your company is worth on paper – both now and into the future – you can put yourself financially in a much better position when selling your business down the line!

Various methods are used to estimate a business’s value, depending on its industry. A traditional valuation by an Accredited Business Valuation (ABV) expert can run into the mid-five figures. 

However, this may be overkill when you’re just entertaining the idea. Interactive uses proprietary computer modeling based on your industry, sales data, and company size to come within 3 to 5 percent of an ABV expert’s report for under one thousand dollars. All the approaches will typically include some sort of market analysis, enterprise valuation models (EVM), and discounted cash flow calculations.

Tax Planning for the Owner

Whether you decide to sell your business or not, it is vital to understand your tax obligations. This will help you avoid any potential financial complications down the line. For us to provide a comprehensive and tailored plan, we need information about your business – including its sales, entity structure, profitability, and income history, as well as assets and liabilities, including any financing the seller may be using. Once we have this information, we can develop a strategy that considers all these factors.

wealth management for entrepreneurs

A common error in selling a business from the owner’s perspective is how the business transaction will be recorded for tax purposes. Most buyers want to register the purchase as an asset sale instead of a stock sale. This technique allows the new owners to maximize their depreciation expense. From the owner’s perspective, a corporation that sells its assets will be taxed twice, once at the corporate level and once at the individual shareholder level. However, a stock sale only gets taxed once. This strategy should be on the seller’s radar to maximize their after-tax gains.

Maximizing Offers to Minimize Risk

When it comes to selling your business, there are a few things you need to keep in mind. First, make sure you have a comprehensive plan in place that takes into account the buyer’s needs and wants. You’ll want to look at things through their eyes so you can understand the motivations.

Second, never be afraid to walk away from a deal, even in the late stages. Some corporate buyers have a knack for last-minute adversarial negotiation tactics designed to give them an upper hand. They’ll limit things to reasonable requests if they know you’re willing to walk. Often the negotiator is an outside attorney looking to justify their $2,000 per hour fee to their clients by playing hardball.

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And finally, make sure you’ve got at least eight or more interested buyers bidding on your firm. There is no greater leverage than the other buyers knowing they’ve got competition. It would be best if you created hype around your business sale along with a deadline for buyers. You don’t want to be in a situation where you only have two firms bidding on your company.

Decide if you want a business broker or an investment bank to help you. Both have advantages and disadvantages. There are also private equity and high-net-worth family offices that make excellent buyers. Make sure you don’t limit your options to only the more traditional avenues.  

Windfall Retirement Planning

There’s no question that your business sale can make or break your retirement plan, but it doesn’t have to be daunting. We’ve outlined here that Windfall Retirement Planning helps business owners make the most of their situation. If you follow the three stages we discussed, you’ll be ten times more prepared than the typical owner who tries to sell their business and doesn’t get any offers or a few lowball offers. The first step is doing all the calculations and helping you set realistic goals and timelines. From there on out, it’s up to you to make sure you plan your work and work your plan for success!

Windfall Investment Planning

When you sell your business, it’s crucial to have a strategy to make the most of the windfall investment. This strategy could involve real estate investments, stocks, bonds, private equity, and retirement and estate planning!

To help you create a tailored plan for your needs and vision, Interactive Wealth uses our proven process called the PlanCycle90 difference. It takes all the burdens off your shoulders and follows a structured, proven method to reach and maintain your goals. 

Stock option planning

On top of PlanCycle90, we use proprietary risk models and deep planning as the final pieces of your investment plan. The combination of all three of these will reduce market volatility to match your specific investment objectives and uncover hidden opportunities, so the process goes smoothly without surprises. 

Leaving a Legacy or Not

Whether you’re anxious about leaving a legacy or want to ensure your wishes are carried out correctly, our estate planning process is a perfect starting point. Our specialists will help you create a living estate plan that takes all of the necessary steps so that your dreams and passions can be carried on after you’re gone.

financial advice for business

It’s more than just how to give away money effectively. Our clients are looking for a way to pass down their values and life story to their loved ones. We’ve found the patriarch or matriarch needs to create an ethical will so future generations understand where their wealth came from and appreciate the sacrifices that were made that they are now enjoying. This process goes beyond the legal and tax strategies we’ll coordinate with your attorneys and accountants to the heart of what’s really important to you. 

Interactive Wealth Advisors — a Trusted Oregon Fee-only Financial Advisor

In conclusion, owners often have many questions regarding retirement planning via the sale of their business. 

That’s why we’re here to help! We’ll work with you to create a personalized plan for sale that considers your unique circumstances and goals. We have over 15 years of experience in the industry, so you can trust us to help make the process as easy as possible for you. 

If you’re considering selling your business to fund your retirement, we can help with a comprehensive exit strategy. We offer various services tailored to companies and their owners, including tax planning, estate planning, business valuation, succession planning, and many more. We hope you found this guide helpful and informative.


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Interactive Wealth Advisors is a Registered Investment Advisory firm in the State of Oregon and Washington. The Adviser may not transact business in states where it is not appropriately registered, excluded or exempted from registration. Individualized responses to persons that involve either the effecting of transaction in securities, or the rendering of personalized investment advice for compensation, will not be made without registration or exemption.
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