4 steps small business owners must take to retire worry-free


“The journey of a thousand miles begins with one step.” – Lao Tzu

I don’t know if the ancient Chinese philosopher Lao Tzu ever retired – or even if “retirement” was a concept in his day or in his culture – but I know that the small business owner’s journey to retirement is definitely in the thousand-mile-plus range.

And that critical first step is the most important.

Today let’s look at the first step and the few that follow, while we keep our eyes focused on the final goal.

Start planning early

Early planning is the only way to be in a position to deal with the various bumps in the road that you will encounter. With early planning, you have time to recover from the down times and you can be more flexible on your exit dates.

It’s a wise person who learns from the mistakes of others and believe me, there are many small business owners today who are unprepared for their retirement. Demonstrate wisdom and don’t repeat their mistakes.

Make the big decisions

Are you going to depend solely on the sale of your small business at retirement, or will you have other ways to establish a substantial retirement savings? Diversification is always smart advice, but I know that in some instances, it is difficult for small business owners to adequately diversify their financial lives. However, if you take my first recommendation and start early, it increases your ability to diversify.

One of the big decisions you need to make in your retirement plan is what will happen to your business at retirement. If it will fund the majority of your retirement, there are a lot of questions you need to answer, such as:

  • Will you sell it to a current employee?
  • Will you sell it on the open market?
  • Will a family member take it over?

Each of these paths will lead to different actions on your part. If you plan to sell to an employee, you need to be sure of the employee’s commitment and you need to be grooming that employee.

If a family member is going to take over your business at retirement, that person needs to be prepared. Further, your financial agreement with a family member may differ from what you would negotiate with someone else.

When a straight sale on the open market is at the heart of your plan to fund your retirement savings, it leads you down a long road where you’ll need to make many smart decisions. Small business owners in this position must make smart choices that maximize the value of their companies and minimize the risk to potential buyers. A well conceived and executed exit strategy can boost the value of your business by 50 percent.

Translate your retirement plan into action

The path you choose will dictate many of your next steps. If you plan to fund your retirement through investments rather than through the value of your business, you might operate your business as a cash cow to pump money into a retirement account or real estate investments, for example.

However, if you want to grow your business and perhaps expand into other markets, it’s more likely that you will plow a lot of that cash back into your company to get a greater value for your business at retirement.

By this point in your small business retirement planning, you should be working with professionals who can take your vision and give you a list of action items to get busy on.

Implement your retirement plan

With a long to-do list and a general direction for the course set out for you to navigate, you will get to the point where you just need to get things done.

I know that this sounds very basic, but the small business retirement savings world is littered with individuals who knew what they should do but waited too long to do it! They pay for their procrastination dearly.

I started this out with a quote I felt applied to virtually every small business owner’s retirement plan, and that is also the way I’m going to end it:

“Ideas are worthless. Execution is what matters.” – Dane Carlson