Can you hear the clock ticking? By the time you finish reading this sentence, a baby boomer business owner will have turned 65. By the time you finish reading this column, five more will have reached the traditional age of retirement.

Those business owners probably have big dreams for retirement, such as moving to a warmer climate, playing more golf or visiting exotic destinations. However, according to a recent study by the National Association of Realtors, 75% of boomers are not financially prepared for retirement. Our discussions with local business owners in this age group indicate that most do not have a plan in place for exiting the business. If they continue to ignore the ticking clock, they may find themselves unable to retire or unable to afford the retirement they’ve envisioned. And, the likelihood that their business will collapse increases with every day they do not actively plan for their exit.

Ensuring your financial security is one important reason to prepare an exit plan. Taking the time to determine the value of your business and evaluate the various transfer options is the best way to ensure a positive financial outcome. But there are non-financial arguments for exit planning, as well. If you want to remain active in the business in some way, preparing an exit plan allows you to define the level and length of that involvement.
The impact of the transfer on your employees, family members and community are other considerations that should be addressed in the exit plan. Selling the business to another company may generate the biggest financial return, but the consequences for your employees and/or family members may be unacceptable. A management buyout or an ESOP (Employee Stock Ownership Program) might be a better alternative.

Passing the business on to the next generation of the family is another option for many business owners. However, financial negotiations and “family baggage” can make these transfers uncomfortable and time consuming; not to mention that only a small percentage are very successful. Even if you’re willing to work through the challenges, you may not be knowledgeable about the different ways to complete a family transfer and how to know which option is best for you. You also need to think about whether or not your children or other family members really have what it takes to be the next owner. It might take several years to educate and prepare them to lead the company. And, often, no matter how hard you try, often they simply do not have what it takes.
Time to get started

If you’re planning to retire within the next 10 to 15 years, now is the time to start the exit planning process. If you have a trusted business advisor, contact him/her today and set up a series of monthly meetings. A couple of hours a month will minimize your risks without interfering with the day-to-day operations of your business. If your retirement timeframe is shorter, there’s no time to waste. Start meeting with your business advisor weekly to hammer out the details of your future. It’s an investment of time that will reap financial rewards and peace of mind when retirement day arrives. Make sure that your business advisor is really experienced in all aspects of succession and exit planning and can provide you with references. Unfortunately, many advisors simply do not know what they do not know about succession and exit planning. Make sure yours does. Ask probing questions to get at their experience.

The clock is ticking. Will your exit plan be ready when the retirement alarm goes off?