There are a number of reasons for selling a business. One of them is retirement. But when is the right age to retire?
Should the timing of the sale of a business be related to the age of the business owner, or when the business is performing well and in the right condition to sell, or when it is better for the business for the owner to pass on the batten to a new more energetic management team?
The truth is that retirement does not have to be at 65.
Whenever the owner chooses to retire, the business needs to be in good shape and with plenty of growth opportunity ahead. Businesses that stagnate for a number of years whilst the owner waits to retire are not very attractive to buyers as the full potential of the business has not been demonstrated for some time. To sell a business successfully and for optimum value, owners need to maintain their enthusiasm and exit when they are at the top of their game.
As an example, with good exit planning, some of the most successful business sales can happen when owners are in their mid-fifties. The businesses are normally well established and profitable and so in a prime position for a larger company or investment group to acquire and grow. Having built the businesses typically from scratch over the last 20 years or so, the owners feel that they have put all they can personally into their business and that a buyer with more focus and energy would be better placed to take the business to the next level. They therefore decide that now is the right time to sell the company rather than wait another 10 years until full retirement age.
It can often be the case that for business owners in their 70’s and 80’s, it is the family that usually managed to persuade them that it is time to retire – before it’s too late. However many owners simply do not wish to retire – running a business keeps them young. Whilst this is entirely understandable, a business is an investment that needs to be considered along with any other inheritance planning, and one which needs careful management to realise its value for the next generation.
In conclusion, here are 5 points to bear in mind for SME owners when contemplating when to retire:
- Retirement does not have to be at the age of 65
- Plan ahead, prepare your business to sell well – don’t let your business stagnate.
- Sell your business while you are still enjoying it and the business is going well.
- Realise the value of your business in good time so that your wealth can be passed on to the next generation.
- If you don’t wish to retire, you can still sell your business but take a consultancy role or non-exec directorship.