Retirement Planning for Business Owners

More than just selling a business!

Many business owners think the move into retirement is an easy one. After all, it represents a complete change in lifestyle and the freedom to do whatever you want without having to worry any longer about the business.

In fact, often business owners find that retirement is not that simple and that the issues they face will go beyond business succession or sale.

There is no shortage of advice to help you plan for the sale of your business, but have you looked at the lifestyle considerations that will affect your move into a new phase of your life?

Those who have made their plans to sell the business seldom look at the lifestyle issues that they will face in retirement, instead focusing on the financial and legal aspects of the sale of their business. In fact, this group is more than twice as likely to return to the workforce after retirement as the general retirement population.1 The number one reason that they chose to end retirement was listed as ‘boredom’.2

If you want to avoid many of the pitfalls that befall business owners who make the move to retirement, here are some suggestions that will help you plan for your transition.

Understand why you are selling your business and moving into retirement. It is not enough for most to know what they are retiring FROM—you have to have a clear understanding of what you are retiring TO! Perhaps you have received an attractive offer that you just can’t ignore. Maybe you have decided that you no longer want the day-to-day demands that a business requires of you. Both are good reasons to consider retirement; however, many business owners choose retirement for no reason other than “it’s time”. That might explain why so many return to the workforce or business after spending time away from their enterprise. If you enjoy what you do and you can find a way to balance the demands of business with the freedom that you want at this stage of life, then look at graduated retirement or turning over the day-to-day responsibilities.
Try to replicate the things that you enjoyed about your business that you might miss when you sell. One of the keys to a successful transition is to find ways in retirement to still do some of the things that motivated you when you were working. If you enjoyed working with the public, you can still have contact with people through volunteering. If you liked being in charge or contributing your ideas, think about joining a board or a service organization that could use your talents. Write down the talents that you have and the positives that your business provides you personally. This list will give you an idea of some of the things that you will want to include in your retirement lifestyle plan.
Consider how you will spend your time now that you aren’t involved in a business. Time management is not an automatic or inherent capability for many retired business owners. They had worked long and unpredictable hours to make their business successful, often giving up weekends and holidays. It is a paradox that the prospect of prolonged leisure and a perpetual holiday from work is an antithesis of the makeup of most small business owners. In short, that is not who they are! Many business owners assume that retirement is a permanent vacation and doesn’t require any more thought than they would put into going on holiday. Don’t assume that you will automatically adjust to life away from work; for many business owners, the transition into this new life means having to learn how to enjoy leisure and still stay motivated.
Treat yourself as an employee when it comes to your retirement plan and insist that your business provide for you when you decide to leave. Don’t look at whether the business can afford to provide for your retirement, and don’t assume that your nest egg will come as the result of the proceeds of the business sale. As a business owner, you have the decision-making ability to create a retirement plan for your employees (which include you). You want to separate your needs as a business owner from your needs as an individual who is trying to plan financially for the future.
Make sure that your spouse or partner is involved in the planning process. While your spouse or partner may not have been involved in the business, they certainly will be involved in your retirement. Taking an integrated approach that considers both business and personal issues brings your family into the planning process.
Work with an advisor who can help you manage the business and personal transition. Certainly this is the time for sound legal and financial advice, but as we noted, your transition into retirement is as much a personal issue as it is a business issue. Not only do you have the business succession to plan for, but also your own wealth management planning throughout the process.



At ScotiaMcLeod, we understand that wealth transcends money and represents the things in life that we would like to accomplish. As a Wealth Advisor, I work closely with my clients to help them create a clear vision of their retirement and then a financial strategy that is aligned with those goals. I think it would be beneficial for us to meet and discuss how we can work together to make sure you get the most out of this next stage of your life.