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Selling your business at retirement

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Planning your retirement sale and maximising business value

After months, years or even decades of tending to your business, closing the chapter and transitioning into retirement can be facilitated smoothly with a business transfer plan in place. By orchestrating the process with the assistance of experienced business transfer agents and using your business valuation report as a navigator, you can elevate the value of your company from day one, schedule the sale of your business based around your retirement calendar and maximise business worth.

When should I start planning my retirement sale?

The time it will take you to prepare your business for sale will be determined by the prescribed measures you wish to put into place, however, a few years can typically provide enough time to conduct internal restructuring, if required, settle outstanding debts and realise investments.

If you have decided to sell your business upon retirement, you may embark on a preparation exercise to assess the existing state of your company and develop ways to enhance it from a reputational perspective. This can also assist in increasing monetary worth as if your business is aesthetically pleasing on the surface and well-structured behind the scenes, this reflects a robust business.

Using the preparation stage to shape your business into strong form, establish benchmarks and adopt best internal practices can increase your chances of attracting prospective buyers. By increasing competition, you can help encourage determined buyers to express interest and submit higher bids, resulting in greater returns.

When is the right time to sell my business?

The timing around your sale will typically be designed around your intended retirement date. Starting with succession planning and concluding with sale negotiations, the timeframe will vary for each business owner as numerous factors will mitigate the speed of the process. It’s better to start future planning in advance to ensure that this doesn’t delay your retirement plans.

If economic conditions turn in your favour, this may be an ideal time to sell your business, for example, securing a high- value, long term construction contract following the announcement of a national housing scheme. The value of such a contract could bolster the reputation and credibility of your business, drawing positive publicity to your brand. Another example is if your lease is due for renewal, you may make the business opportunity available in the run-up to this to allow prospective buyers to relocate if they wish, expanding your target audience range.

A healthy and thriving business is likely to generate greater returns than a failing entity due to the reduced risk level and cash predictability, whereas selling a financially distressed business is likely to be more challenging. If your business is straddling between poor health and short-lived phases of stability, selling your business at its strongest may give you the best chance of a successful sale. If your market share is expected to drop which is likely to impact earnings due to a competitor merger or acquisition, you may consider selling your business before this comes into play.  

Selling shop as an alternative to winding up

As a business owner nearing the stage of retirement, deciding on a suitable exit route will typically be the final and foremost decision you will make before entering retirement. There are a variety of ways in which you can facilitate an exit, however, each route will result in a different financial outcome. This can range from winding up your business, selling part of your company, a competitor buyout or taking the business transfer route. It is instrumental to explore the options available to you as by selling your business, rather than winding up, you may be able to generate greater returns.

Preparing your finances for retirement life

As a result of consistent efforts to maintain operational efficiency and preserve business value, you will be able to build a hard-saved pension to maintain your standards of living after retirement. By conducting a valuation of your business, you will be able to calculate how much your business is worth and arrive at an estimation of how much you can realistically generate from a sale. By preparing your exit years ahead of your retirement, you can work towards maximising sale value and achieving your financial goals.

A company valuation will calculate your business value; however, the figure is likely to be influenced by buyer appetite, economic conditions and the political climate. The tax consequences in place during the financial year and impending changes to tax law may influence business worth, impacting your returns. By calculating an estimated price, you can integrate this into your retirement plans and preserve business value accordingly.

If you are preparing your business for sale, require advice concerning a retirement sale or would like Selling My Business to value your business, contact a member of the team.

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