All Posts Tagged: business owner

Succession & retirement planning: a double challenge for business owners

Michelle Di Gangi
Small Business Banking

As every entrepreneur or small business owner knows, planning for retirement is much more complicated than just putting money into a retirement account.

Mother and daughter doing some woodworking in their studio.When you own a small business – and particularly when that company has been your dream and that you’ve sacrificed to help grow – the mere idea of relinquishing control can be difficult. However, for many, it’s inevitable. It’s not just age: The company is often the primary asset, so tapping into its value is essential to finance retirement.

The data is clear: Small business owners are wary of succession planning. A 2014 poll by the Financial Planning Association in conjunction with CNBC found that only 30% had any investments outside their own business and delay drawing up any formal succession plan. But it’s a task that must be confronted to look after both your retirement and the future of the company.

Of course, each owner needs to find his or her own solution and be creative in exiting the leadership role. Even the timing of your plan can be critical, as REDCO Inc.’s Keith Hawkyard shared with me in our interview about his business succession planning.

Here are several other key elements worth considering as part of your plan:

  • Start early. Give your kids summer jobs, so they get a sense of what your business is about, and you can evaluate them. Both sides can decide whether there’s a long-term interest, and fit.
  • If there’s no family heir, is there a business partner or key employee who may be your successor? If you have a partner, be sure you have a “buy-sell” agreement in place, spelling out the terms under which he or she has the right to acquire your part of the business (or vice versa.)
  • Get a valuation of the business and decide how your family heir or employee or other hand-chosen successor will pay to acquire it. They could borrow, or you could finance the transaction, receiving a portion of the income annually (plus interest.)
  • You could also consider an Employee Stock Ownership Plan, or ESOP. These allow you to sell part or all of your holdings in your company to a group of your employees over time.
  • Finally, there’s the outside buyer option. While the other alternatives sound complicated, this can be just as tricky. Some businesses (like consulting firms) aren’t appealing because their only asset is the individual who wants to retire. In other cases, the acquirer wants to buy an asset – real estate or patents, perhaps – but doesn’t want to keep running the business.

The biggest factor in your favor? Being a small business owner means that you’ve had a lifetime of successfully tackling complex problems. You’re just adding one more to the list.

For more information that may help your business succession planning, read our “Smooth Transitions” report.


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The balancing act of the serial entrepreneur

Kristin Nelson
Wealth Management Strategy
Serial entrepreneur, center, meeting with a male and female associate as the all discuss what

Both your personal and business financial lifecycles must be considered when evaluating and setting your needs and priorities.

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A winning framework for your negotiations

Don Mercer
Posted by Don Mercer
Small Business Banking

As a business owner, your negotiations will often take place with a party whose relationship you value, such as a customer, vendor, employee, or investor.

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One retirement option: Start a business

Dale Niemi
Posted by Dale Niemi
Retirement & Investing
Older man in business attire consulting with two women, pointing to a report on the desk in front of them.

New entrepreneurs of retirement age bring a wealth of relevant experience, resilience, and professional networks that may be an advantage in starting a business.

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Making a plan for business succession

Kristin Nelson
Wealth Management Strategy
Older man and younger woman standing at white board full of colorful post-it notes as he explains them and points at one.

One of the most important questions a business owner may ever ask is: What’s my exit strategy?

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