SAN FRANCISCO — Are you dreaming of retiring? Or is fear of forced retirement a better description of your perspective?
Given the average age of owners of drycleaning operations, a common request for consulting assistance is: “Can you help me determine if I can afford to retire?”
That determination requires close examination of many factors.
TIMING
Immediate — There may be a reason that retirement is mandatory immediately. Some of these motivations include health issues, board or partner decisions, or perhaps you have just had enough and can’t face the trials of commerce any longer. Surprisingly, the last of this group may be the easiest to accept and implement, because the decision is yours.
If retirement is imminent, it is essential to take a critical look at your retirement needs, both financial and otherwise.
A good financial advisor can help you realistically assess what your current assets can provide relative to time value of money and expected expenses during retirement. In conjunction with your accountant, the advisor can help determine which assets should be reallocated to best fit your expected needs.
An intensive profit/loss review of the distribution channels might indicate that closing unprofitable stores, routes or divisions will provide the needed cash flow from the remaining profitable outlets.
An underutilized plant or store could be partially sublet to a compatible business without reducing the operational efficiency and potentially adding to the positive cash stream.
Six Months — With a few months’ warning, these steps can be taken without the immense pressure of immediacy, and other options can also be considered and implemented, potentially with the owner’s involvement.
One to Three Years — A longer time horizon can provide enough time to identify internally, or hire externally, a general manager candidate and to train them to manage with your specific processes and procedures.
Again, considering an installment sale allows the tax impact to be spread over multiple years.
Three Years or More — Depending upon the age of family members, long-term planning may provide enough time for adult children to determine if they want to participate in the family business.
Continuing to own is, in a sense, the same as rebuying since it is a decision to continue the investment.
PROXIMITY
Factor into your decision where you want to spend your time and whether it is realistic to visit periodically and how often. Many tools are available that can supplement or replace “being there,” such as cameras in stores, and remote tie-ins to systems and meetings. Whatever your reasons for combining ownership and retirement, careful planning can make it more rewarding.
To read Part 1, go HERE.
Have a question or comment? E-mail our editor Dave Davis at [email protected].