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What to Consider Before You Sell Your Business and Retire

Planning can boost the sale price and your personal satisfaction

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En español | When he owned the Modern Sixties Wine Lounge in Fort Lauderdale, Florida, Frank Ruppen spent his days placing orders and overseeing administrative tasks and inventory. His nights were full too, as he dedicated time to building relationships with customers. In 2017, Ruppen — who was 59 years old and ready to retire from the bar business — decided to sell the wine bar to an acquaintance.

"I got my life back,” Ruppen says.

Selling your business can do more than just free up time: The proceeds can fund your retirement. Yet hanging a “for sale” sign doesn't guarantee everything will fall into place. Ideally, business owners should prepare for the transition well ahead of time, according to Joel Guth, CEO and founder of Gryphon Financial Partners, a wealth advisory firm in Columbus, Ohio, that helps business owners plan strategic exits. “A three-year window before exiting allows time to work on key issues,” he says.

The right road map can lead you through the steps of preparing, selling and moving comfortably into retirement.

Figure out how much your business is worth

It may be easy to think your business is valuable, but a quick glance at its revenues won't really reveal the big picture. Having the company professionally assessed can help you evaluate how its assets and liabilities line up, along with what prospective buyers might be willing to pay. “Get a qualified team of advisers,” Guth says. Professionals with experience preparing and selling companies can help you lessen risks and identify strategies to increase the sale price.

"Review in detail two prior years’ tax returns and make sure they align with the business valuation you're looking for,” says David Moore, president of Dandelion Mergers & Acquisitions, headquartered in Charleston, South Carolina. Past financial performance plays a role in determining what a company is worth. Check if debts from previous years could be paid off to reduce liabilities.

Get ready to hand over the reins

When Craig, who asked that his last name not be used, put the software business he founded and oversaw for 24 years on the market, he felt the first offers he received were too low. In hindsight, there was a reason behind the numbers. “The company wasn't ready,” he says. Craig — who was 56 years old when he sold that company — and his staff then spent the next few months working with professionals to get the firm in better shape, and he ultimately ended up selling the business for a suitable price. “Do a mock due diligence [like I did] before selling,” he suggests. “It costs a little, but it will show every hole a buyer will look for.” You can then work on fixing those problems to make the enterprise attractive to buyers. “It's like selling a house,” he says. “You first put in fresh carpet and paint.”

From a leadership standpoint, it also can be valuable to outline your current role in the company. Then look for ways to step back. “This way, it doesn't look to a buyer like you're too involved,” says Jason Hartman of Palm Beach, Florida, who sold his real estate brokerage to Coldwell Banker in 2005. Check that important equipment like the software necessary to keep the business going is easy for the buyer to take on.

For the two to three years prior to selling, “don't put personal expenses through the business,” Hartman says, if you currently do so. You may lose the tax benefits, but potential buyers will be able to gain a clear view of the business operations.

Think about your life after you sell

Business owners frequently dedicate 60 to 70 hours a week to working, and stepping away from that can be an abrupt change. Those hours at the office might be replaced by trips, vacations in a second home or a new philanthropic pursuit. “It's a matter of understanding and building out a schedule of what you'll actually spend and how you'll live,” Guth says.

This exercise can be eye-opening. Guth worked with one client who sold his company and wanted to travel extensively during the first three years of retirement, but travel costs can quickly add up. Part of the planning process for this client included researching airline tickets and hotel prices. Understanding the cost of your new schedule and activities can help determine the amount needed to fund the retirement lifestyle you want.

There's an emotional component at play as well. More than three-quarters of business owners who sell end up unhappy within 12 months, according to the Exit Planning Institute. For many, “so much of their life and time was committed to the business that finding their purpose and calling post-owning the company is very hard,” Guth says.

Finding a new passion is key to matching your budget with satisfaction. For Ruppen, the wine lounge owner, that new activity centered on the friendships he made while owning the bar. “I have planned wine trips all over the world and take 10 to 15 people on personalized journeys that expose them to new wines, new cultures and new places,” he says.

Don't overlook your family

When Frank Fiume, 51, founder of i9 Sports, the largest youth sports franchise in the country, decided to sell, he still loved the business. But at the same time, he felt pulls in other areas of his life, including family. “My wife and I were turning 50 and we didn't want to live with regrets,” he says. While the company was still seeing double-digit growth, Fiume sold it first to employees as an ESOP (employee stock ownership plan) and then two years later to a private equity firm. The result was an all-around win: Through the process, Fiume stayed on the board of directors and kept a share in the company so he could continue to be involved. At the same time, he and his wife were able to redesign their lives, and Fiume wrote a memoir and business book, Running With My Head Down. “I did things I never thought I would do,” he says.

In addition to including family in your personal plans, you'll want to keep discussion lines about the company's future open. If you plan to have a child involved in the business after the sale, you may decide to pass off certain duties over time. At the same time, you might opt to move the business completely away from the family's involvement. Fewer than 30 percent of family businesses survive into the third generation.

Although expressing your viewpoint may not be an easy task, the effort can be worthwhile. The discussion may smooth over anxieties or worries about what will happen next. Furthermore, it can help pave the way toward stronger ties. “The most important things are friends and family, and having a purpose,” Craig says.

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