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.
Is there a deterring obstacle preventing your retirement? Do you think that the only way to fund retirement is to sell the business you have worked so hard to build?
Will you be happy staying away from the facilities that are the heartbeat of the company? Are you concerned about losing your "identity” in the community or in the family?
How will you spend your time? Are you eager to do something else entirely? Is your spouse or partner ready for your retirement?
Do you have additional assets that can be relied upon for your living expenses?
These are just a few of the considerations to ponder before making the decision to retire.
Retirement is one of the most dreamed-about phases of life, and one of the more traumatic, as it is tied at number nine on the Holmes and Rahe Stress Scale (you can do an internet search about it), which is a listof 43 stressful life eventsthat can contribute to illness.
Before deciding, review your entire financial situation with a good financial planner and/or a team of advisors that understand the ramifications of the various options available to you and the tax impact of each.
Many excited sellers have had their enthusiasm dampened by the tax calculation on a proposed sale, often after they have contracted to sell.
If you decide that retirement is for you but selling is not the path to take for whatever reason, be assured that retirement without selling your business is a definite possibility.
REASONS FOR RETIRING WITHOUT SELLING
Pride of Ownership — You built the business and have every right to be proud of the success achieved, especially if your name is on the marquee. The business is an extension of yourself and you may believe that no one else can maintain the image you have attained by running it.
Family Legacy — Emotional: If Great-Great-Granddad Johansson founded the company, how can you possibly let it go? Legal: Is there a binding legal commitment that prohibits the company leaving the family? Children too young or not ready to decide or take over: You would love for the next generation to perpetuate the family ownership, but they are pre-teens or out in the world making their mark in another industry.
Cash Stream — Perhaps the cash flow is not enough to attract a buyer, but you can sustain yourself on it and the other resources you have available until the profit and loss, and balance sheet, improve.
Avoid the Tax on Sale — The tax bite is too big proportionate to the price of the business.
Sale Triggers Undesirable Event — It might be the case that a sale would require steps that may be detrimental, such as indemnifying a buyer against a current lawsuit, a divorce might trigger an asset division, a silent partner might demand to be cashed out.
Working Smoothly without Daily Involvement — You have confidence that the business can run efficiently with only monitoring and occasional guidance from you.
Good Lieutenants, No Generals — You have good implementers, but no leaders strong enough to be owners, but with your guidance, one of them can possibly be groomed as the future owner.
Environmental Issues — Sales usually require environmental inspections either for the buyer, the lender, or both.
Temporary Buyer’s Market — Your preference is to sell, but the market is not currently favorable to sellers.
Partnership Entanglements — One or more partners have reasons for not selling or have expectations that cannot be met with a realistic sales scenario.
Adversarial Relationship with Legal Stakeholder — Like partnerships, you may have stakeholders that cannot be satisfied or eliminated with a sale. An example might be demands of heirs of a previous owner who is now your lender.
Better Work-Life Balance — You are working more than you would like to and just need to let go gradually. Your “retirement” may be temporary, such as a sabbatical or a test to determine if you like retirement.
Designing Retirement as the Owner — If there has been little or no planning prior to the actual date of retirement, the implementation is more difficult because timing is a critical factor to a prosperous retirement.
Check back Thursday for the conclusion.