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Published March 25, 2021

Question: I am fortunate to have built a successful small business and contemplating retirement in five years. I know I need to develop a plan and need some direction. What advice can you offer?

Answer: It is indeed rewarding to watch your business grow and thrive. You did not reach this stage without hard work and thoughtful planning. I would hope you have given the same attention to an exit strategy that will maximize the value of your business and ensure its continued success after you depart.

Unfortunately, too many business owners wait too late to begin this process. At the very least there are three main things you should do to ensure a comfortable retirement lifestyle:

• Establish a retirement savings account – For the small business owner a Traditional or Roth Individual Retirement Account (IRA) is a good way to start. As your business grows and you generate excess cash you may also consider a Simplified Employee Pension plan. A SEP IRA is a variation of the Individual Retirement Account and is adopted by businesses to establish retirement savings for both the owners and their employees. Other options may include a 401k.
• Develop and exit strategy – Ideally you have invested in an enterprise that is marketable. At least five years prior to your exit you should begin to think about a successor. Perhaps it’s a friendly competitor or a family member who has helped you grow the business. You need to develop a plan to establish a proper value, determine how it will be financed, and how you will receive the proceeds. In certain situations, an Employee Stock Option Plan or ESOP is desirable. 

An ESOP is usually formed to facilitate succession planning in a closely held company by allowing employees the opportunity to buy stock. 

• Assemble a team of trusted experts – In both of the above instances you will need to rely on qualified professionals. These may include a CPA, tax attorney and a financial planner. Be careful with your selections as your future well-being depends on the advice you receive.

If you are still unsure how to proceed your local SCORE business counselor can work with you to develop a viable exit strategy.

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Gray Poehler is a volunteer with SCORE Naples. Business counseling on this and other business matters is available, without charge, from the Naples Chapter of SCORE. Call (239) 430-0081 or visit https://naples.score.org/mentors .The SCORE business office is located at 900 Goodlette Road North, in the Fifth Third branch bank building.