Key Insights:
- Less than a third of businesses are successfully sold.
- Many business owners lack a succession plan.
- Diversifying retirement plans is crucial for long-term security.
Understanding The Market Reality
For many entrepreneurs, their business is not just a source of income; it's their life's work and, they believe, their ticket to a comfortable retirement. However, this can be more of a risky assumption than a reliable strategy.
According to Worldwide Business Brokers, less tdan one-third of businesses put up for sale actually find a buyer. This is a wake-up call for business owners who may be over-reliant on the idea that their business will be their golden parachute.
Harsh truth: You can only get for your business what someone will stroke a check for.
The Value Of Professional Valuation
One of the first steps in understanding your business's role in your retirement plan is to get a professional valuation.2 This step is crucial as it sheds light on the actual market value of your business, which often differs from the owner's perceived value.
Once you have this, you can have a better indication of how many assets you will truly have that, therefore, can be turned into an income stream for you in retirement.
The Importance Of A Succession Plan
Creating a succession plan is essential, yet many business owners neglect this step. Whether it's grooming a successor from within the family or identifying a key employee, having a plan in place is crucial for a smooth transition, should a sale or handover become necessary.
You don’t need to be dead-set on your succession plan from day 1, but it can help to have at least one route in mind for when you exit.
Diversification: The Key To Security
Tony Robbins says, “Diversification is the only free lunch in finance.” Relying solely on one asset for retirement is a strategy full of risk. Business owners are advised to invest in a mix of assets – from stocks and bonds to real estate – to pursue a more stable and secure financial future.
If you want to get more complex, you can consider things like alternative investments.
Closing Thoughts
The notion of your business being a guaranteed retirement fund is, for many, a flawed plan. It’s not so much a lottery ticket, but it might be a dream. It's important to face this reality head-on and take proactive steps to secure your financial future.
For business owners looking to bolster their retirement planning, reaching out for professional advice can be a game-changer.
1 Caffrey, Joseph. “How Many Businesses Sell?” Business Brokering Buy Sell Business - Worldwide Business Brokers. Accessed 1 Feb. 2024.
2 The author does not provide qualified business valuations. For a qualified or certified business valuation, consult a properly credentialed appraiser.
This article is for informational purposes only and should not be taken as investment advice. It is important to do your own research and consult with a financial advisor before making any investment decisions.
Armando Sallavanti is a registered representative of and offers securities and investment advisory services through MML Investors Services, LLC. Member SIPC. Supervisory Office: 2 Bala Plaza, Ste 901, Bala Cynwyd, PA 19004. Tel: 610.766.3000.
This article is from an unpaid external contributor. It does not represent Benzinga's reporting and has not been edited for content or accuracy.
© 2024 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
Comments
Trade confidently with insights and alerts from analyst ratings, free reports and breaking news that affects the stocks you care about.