Is your business ready for your retirement?

July 08, 2016
Is your business ready for your retirement?

By: María del Pilar Cantoni, Planificadora Financiera, Assistant Vice President.

Every business should have an up-to-date succession plan. To determine where your business stands in developing a Succession Plan, you need to ask yourself the following questions:

  • What are your main objectives at the time you leave your business? For example, on your retirement date, what income do you need to achieve financial security and to whom do you want to leave the business?
  • What is your business worth? The value of a business is different for various buyers and the seller. The value should not be confused with the price, which is an amount that the seller and buyer agree to in order to transfer the business.
  • Do you know how to increase the value of your business? You need to take in to consideration that your employees are your most valuable asset.
  • What is the best way to sell a business to a third party to maximize liquidity, minimize tax liability and reduce risk?
  • Do you know how to transfer the business to a family member, a partner or to the employees while paying the minimum possible in taxes and enjoying financial security?
  • Have you taken all the necessary steps to ensure continuity of the business without you?
  • Have you provided for the financial security of your family and the continuity of your business in the event of your death or disability?

The valuation of a business is not an exact science and can vary based on the kind of business and its purpose. A wide range of factors can affect the process, from the book value to a group of tangible or intangible elements. Don’t forget that the employees are an indispensable component of a valuable business. Key employees may be even more valuable to the business than the owner. You should also consider that the more valuable the owner is to the business, the lower the value of the company when the owner retires as a key leader. That’s why you should train and prepare key employees to become potential owners or part of a stable and motivated management team that can increase the sales price of the business.

These are some of the most important aspects that make up the succession of your business. However, you should consult a financial planner to help you achieve a successful transfer of your business.

Learn more about the value of your business, with our 4 Questions to Help You Calculate the Value of your Business.

This article is for informational purposes only and does not constitute an endorsement or guarantee of accuracy or applicability for any particular purpose. Neither Popular nor any of its affiliates, subsidiaries, or related companies shall be liable for any special, direct, or indirect harm stemming from the information contained in this article. Should you require further information or guidance on the subject of this article, you should always seek the advice of a competent professional of your choice.

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