Transition to Retirement

Getting your Business ready for transition

The need for Transition Planning

Typically, business owners have worked hard to build their business, and they are proud of that. They do not want to think about retiring, and there are plenty of reasons for not changing what they do now.

We have all hard about other owners who have sold their businesses and retired – and after a short period they become bored and depressed. Business owners like running their business, they are good at what they do, and so it’s hard to imagine what they would do with their life if they do not have that work place to go to every day.

Usually, their business is their life. So why don’t owners want to think about leaving? It could be:

  • Fear of an unknown future;
  • Owning and running a business gives their life meaning and purpose;
  • Leaving the business will leave to a loss of social status, and a loss of identity; and
  • They have no vision with what to do in their new life.

The fact is that, at some stage, all business owners will leave their full-time role. So a transition will inevitably happen. The question is – will they be ready for it? The solution to these concerns lies in proper business succession planning.

Benefits of Transition Planning

Qualitative issues are as important as quantitative considerations when transitioning out of a business. Often, psychological and emotional issues hold business owners back from thinking about leaving their business or beginning the actual planning process. To put it another way, the Heart Issues are just as important as the Head Issues.

Owners who engage in transition planning are able to deal successfully with both the “hard” and “soft” issues involved in transitioning out of a business. As part of the process, they also work with a team of experienced advisors — including an accountant, lawyer, financial planner and other professionals — to develop and implement the best financial and business strategies for exiting and passing on their businesses successfully.

By preparing a personal transition plan, to create a life with purpose and identity outside their business, the business owner is more likely to let go of the business and transition successfully. The business owner who prepared a business transition plan is also more likely to make a successful transition out of their business for a higher price.

A successful transition plan entails the following elements and enables a smooth business succession and transition to retirement.

Personal transition plan

Business owners, executives and professionals all need to undertake a process to complete their personal transition plan. This process typically includes the following steps:

  • Considering and transforming their fears around leaving business or work;
  • Devoting the time and resources to develop a personal transition plan;
  • Considering a range of options for what to do in retirement – for example activities with family and friends, physical activity, intellectual stimulation, paid and the charity work;
  • Brainstorming these alternative retirement options with others;
  • Creating a personalised transition plan including a detailed action implementation plan and a retirement strategy
  • Continued review of the plan leading up to, and during, retirement.

Business transition plan

Once they have completed their personal transition plan, business owners will be more readily able to let go of their business. To assist in this process, they should undergo a program to complete a business succession plan to be implemented with their team of advisors. Such a program ideally will address the following:

  • An analysis of different options for new ownership of the business;
  • Processes to emotionally separate from the business, while creating their personal goals around leaving the business;
  • An understanding about how much they need from the sale of their business, and how much it is worth (and, therefore, whether they need to put in place a process to increase its value);
  • Any steps necessary to increase the value of the business and make it ready for sale to new owners – for example –
    • Perhaps appointment of management,
    • A focus on corporatisation of the business to make it less dependent upon the owners,
    • Organising systems and processes, and
    • Ensuring all structures and documents are in order; and
  • The process of actually selling the business..

Working with a team of advisors is essential for the planning process around creating a successful transition to retirement.

Whether you are planning for retirement, looking at transitioning out of your business or are already retired and looking at what more you can do, Transition Planning is here to assist you.

Transition Planning Australia’s retirement planning tools, information and guidance will help you make the right decisions for your life after work and for the future of your business. For more information about developing a plan for your next phase and to discuss your Transition to Retirement, speak with Transition Planning Australia today.

 

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