It may be time to come to grips with one of the hardest questions facing any entrepreneur: Who will run your business when -- or if -- you're not around?
Kathleen Richardson-Mauro agreed: "So many CEOs, rather than deal with the reality of their company's future without them, carry on as if nothing will ever change."
The pair speaks from years of experience. They're partners in Richardson-Mauro & Johnson, a Boston-based consulting firm that helps business owners plan for a smooth transition to life after entrepreneurship. Richardson-Mauro has owned five different businesses, and Johnson sold her accounting practice after 14 years.
Now, they've turned some of that know-how into a book, Cashing Out of Your Business, and a self-help website, the Business Transition Academy. Here are three tips to getting ready for your retirement:
1. Figure out what a happy life outside the business will look like.
By now, if you're like most entrepreneurs, your identity and that of the company may be one and the same. But looking ahead means turning your attention to other interests, whether those are spending more time with family, catching up on reading, or taking time to travel. Devoting some time to this now "will provide you with direction and enable you to minimize regrets later," said Johnson.
This is also where entrepreneurs need to be hard-headed about money.
"Take stock of the assets you've accumulated outside the business, as well as how much money you'll need to extract from the company to fund the rest of your life," Johnson suggested. Then make a specific timetable for withdrawing that money from the business, perhaps putting it in a tax-deferred retirement account, a 5-year certificate or a 10-year bond. That way, neither you nor your heirs can easily spend it.
2. If it's a family business, be extra cautious.
Richardson-Mauro noted that most U.S. companies are family-owned enterprises. "Naturally, owners often want to 'keep it in the family', but that doesn't always work out," she said.
One common mistake: Trying to be "fair" by distributing ownership evenly among children, even if they haven't all taken an active role in the business. "Be honest about what's really best for the company and its employees," Johnson said.
Consider grooming a trusted lieutenant to take over when you step aside. It's also possible that the business' future lies with someone you haven't met yet. Richardson-Mauro said an increasing numbers of baby boomer CEOs are selling their companies to people eager to run their own show. A business broker can help you find the right buyer, especially if you're not in a hurry.
3. Start making a succession plan now.
Many business owners procrastinate until they get an unsolicited purchase offer, or their world is rocked by a life-changing event like an illness or injury, before they start thinking about what's next. The trouble is, making decisions under pressure rarely works out as smoothly as taking your time and thinking things through beforehand.
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