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Pouring your heart and soul into building your business has consumed almost all your time and energy. Now that your business is well-established and running like a well-oiled machine, you may be thinking about retirement. What to do when you retire as a business owner may depend on how well you have planned your exit.

Create Your Own Retirement Plan

Qualified financial advisors can help business owners set up retirement plans that offer tax advantages and provide retirement savings. There are many strategies that allow business owners to salt away significant amounts of money in tax-deferred retirement accounts. One such strategy is to create a Defined Benefit Plan, a plan that can allow much larger annual contributions than the typical 401(k) plan. Consult your financial advisor and tax attorney for advice on contribution limits and tax treatment.

But ultimately, in addition to what you have saved along the way, the largest piece of your retirement plan is likely the monetary value of your business. Which leads us to . . .

Prepare (in advance) to Sell Your Business

To prepare yourself for a successful retirement, your need to have a plan - a “succession” plan. This may take the form of identifying a management team that can keep things running when you leave. But, more often it means selling your business to an outside buyer. When you sell, you secure your retirement by collecting a bundle of cash at closing. If, on the other hand, you turn over your business to management after you retire, you keep the risk that the business might fail. If it does fail, you either have to jump back in or risk seeing your retirement plan go up in smoke.

In order to prepare for the eventual sale of your business, and to make your business attractive to prospective buyers, you can start working on the following items now:

• Develop a strong 2nd tier of management that can fulfill the functions that you take care of
• Make sure your books and records are clean and in good shape
• Start addressing any business weaknesses that need to be fixed, like risky customer concentration or inadequate control systems
• Do whatever you can to keep the company on a strong growth path

You should engage the services of a reputable business broker before you are ready to start the sales process, so he can help guide you as to how best to position your business for a successful sales outcome.

Figure Out How You’ll Spend Your Time

Many business owners obliterate work-life balance, spending every waking minute managing or thinking about improving their business. A sudden shift from a 60-80 hour a week schedule to totally free, unscheduled time is more than many business owners can handle.

What are you going to do with your time after you retire? Golf? Travel? Mentor young business people? More time with the kids and grandkids? Make a mock schedule of how you’d spend your time if you no longer must think about your business every waking minute of the day. Work with your financial advisor to determine how much income you’ll need in retirement to maintain the lifestyle you’d like to have.

If the thought of not working at all is too much for you, find another career, start a new business, or identify causes you care about and volunteer your time and expertise. Remember, continuing to work and receiving a paycheck has implications for your Social Security payout if you haven’t yet reached full retirement age.

Think about what to do when you retire as a business owner long before the time comes, and you’ll be prepared retire securely and pass your business on to a new ownership team that will continue your legacy as a business owner.

Construction trades businesses often have specialized features that require extra care when preparing for a sale. Here are some things to consider when selling a construction business.

Management Team

Construction trades business owners are often heavily involved in the day-to-day operational aspects of running their businesses. While it’s great to keep your hand on the wheel and be involved in every project, too much direct owner involvement could create problems when you want to sell. If you are the person in your company that has the relationships with key customers, potential buyers might be afraid that your customers could use the change of ownership as a reason to try out competing firms. This might cause the buyer to shy away from making an offer or reduce the value he places on your business.

To solve this problem, when you are beginning to think about selling, it’s a good idea to beef up your management team and start transitioning key customer relationships to your employees. This way, when the change in ownership occurs, it will be seamless from the point of view of the customer. The same employee who dealt with the customer on Friday before the transition will deal with the customer on Monday with the new ownership in place.

Backlog of Work

If your construction trades business is service-work oriented, then having a pipeline of signed work isn’t usually an issue. Your jobs come in on a day-to-day, as-needed basis. But, on the other hand, if your company is largely project based, a strong backlog of signed work is critical to having a successful sale.

You might have a history of doing $20 million dollars a year in revenues. Which is great. But when a new owner comes in, he wants to know that the historical revenue trend will continue – at least for the near future. You need to have a strong backlog that shows the buyer (and his lender!) that there are profitable jobs on the books that will continue to bring in revenues and pay the bills.

Not only will you need a strong Work-In-Progress (”WIP”) report, you should also create a report that tracks projects that you have bid on (broken out by how likely you are to be awarded the project) and projects that you are tracking to bid. This way the buyer can gain some visibility into what your business will look like a few years down the road and gain confidence that he can continue the company’s success into the future.

Clean Up

It’s easy to get caught up in the operational day-to-day issues of running a business and to neglect the less than glamorous work of making sure that all of your documentation is in good order. Owners accustomed to rolling up their sleeves getting work out the door sometimes don’t focus enough on keeping financial and other records in perfect order. Buyers (and lenders) however, will want to see employee and operational manuals, financial records, regulatory compliance records, licenses, etc. all up-to-date and accurate.

Selling a construction trades company isn’t a task that every business broker can accomplish. There are industry-issues that only a broker experienced in selling construction trades businesses will understand.

Work with an experienced construction broker to assure a successful sale of your business.

The COVID-19 pandemic has made selling a business more complicated, but not impossible. Liquidity and low interest rates combine to create favorable conditions for sellers who can demonstrate that their business continues to be viable. Pay attention to tips on how to sell your business during COVID, and you can conclude a sale at a strong price with favorable terms.

Know Why You Want to Sell

It’s better if the pandemic is not the driving force for your decision to sell. Maybe the pandemic came along just as you were planning to retire anyway. Or perhaps you were already “burned out” and looking to pursue other business opportunities. If your business was not seriously affected by the pandemic, now is a great time to sell. If, however, your business was affected, and you have the will and the energy, you may want to re-invest and rebuild before you put your business on the market. Or, if you were already close to retirement, or you just don’t have the passion or the funds to rebuild, selling your business now, even at a somewhat distressed price, may be the best course.

Stay Afloat

Essential businesses, technology, online education, ecommerce, and delivery businesses are participating successfully in what may be a permanent change in the business landscape. But even if your business has suffered, don’t give up. Your business had value before and still does; your choice is to sell it now at a discount, or to reinvest, rebuild and do the work necessary to mitigate the damage the pandemic has done to a previously thriving business. Getting your business “back on track”, even at a lower run rate, will help prospective buyers gain a picture of what your business looks like in more “normal” times and will support a stronger price.

Be prepared to show the actions you took to adapt to the pandemic environment. Everything from remote customer service to adjusted product lines to reduced overhead from remote work may be relevant. Buyers will also want to know how you managed cashflow during this crisis. Document the steps you took to stay afloat and ahead on your balance sheet.

Mitigate Risk

Just as you would in ordinary times, clean up your finances and address pending risks that could deter buyers. Slow-moving inventory, outsize debt, inordinate personal expenses, outdated operational and human resources practices, litigation, and a backlog of accounts receivable can deter buyers. A small investment in cleaning up these items can make a big difference in the price your business will command.

Work With Professionals

Now more than ever, a professional business broker can help you prepare your business for sale and both find and vet prospective buyers for you. A business broker will help you prepare the best and most accurate picture of your business’s value to present to potential buyers, taking the impact of the pandemic into consideration. Don’t limit your thinking to the local area only; for example, reputable business brokers in the Washington, DC, area will have contacts nationwide that can help identify serious buyers who want to enter the local market.

Selling a business is never easy or quick, but even during the COVID-19 pandemic, it is possible. Knowing how to sell your business during COVID means understanding that many of the ordinary considerations, like accurate valuation and historical performance, are still very relevant even taking the pandemic into account.

If you are thinking about selling your business, it’s important to understand that different types of buyers for your business will have different motivations, concerns, and processes. Your professional business broker advisor will help you navigate among the different types of buyers and help you to find the buyer who will give you the best deal and carry your business forward successfully.

Entrepreneurial High Net-Worth Individuals

Individual buyers either have previously run businesses themselves or are first-time buyers who possess the general business skills needed to manage a business like yours. These buyers put up their own money and/or take on the risk of borrowing money to buy a business. Individual buyers have a lot at stake and tend to be cautious throughout the process. While it sometimes takes a bit more patience and hand-holding to get a deal done with an individual buyer, once he is comfortable that your company represents a safe investment, the entrepreneurial individual is often the perfect buyer.

Private Equity

While it’s unlikely that small to mid-sized business owners will see large financial players or huge hedge funds show an interest in their company, smaller private equity groups often purchase businesses in the $1–50 million range. These groups are composed of investors who pool their money to acquire portfolios of businesses. They might involve several members of a wealthy family, where the family wealth itself is the “business,” or they may simply be a group of experienced investors, successful enough not to need outside financing, who see the potential in a mature business that can benefit from professional management when the founder is ready to move on. Private equity funds look at numerous businesses. If they like yours, they can make a quick decision and usually are willing to pay a strong price.

Other Companies in the Same or Related Industries

Companies in your industry or a related field often find that acquiring businesses in the same or related field is the quickest route to growth. These companies might have an interest in purchasing a business in a particular location to expand their geographic reach. Location might make a difference, so if, for example, your business is in Virginia, look for a business broker with experience selling Virginia-based businesses. While selling to a direct local competitor can risk breaching confidentiality, a company in your industry but not in your area (or in your area but who is not a direct competitor) can be a good buyer who will understand the value of your business and is willing to pay a good price.

Different types of potential buyers for your business will approach the purchase differently—as an opportunity to expand their market share in your industry, to add to their portfolio, or as a chance to strike out on their own. All these motivations will drive how these buyers value your business and what information about your business they’ll look at most closely.

It is critically important to keep your plans to sell your business confidential until the sale has closed. The best time to tell your staff is after the transaction is completed. Here’s  when and how to tell your employees you  are selling your business.

Building a successful business is an impressive accomplishment. Selling a business can be the business owner’s crowning achievement or, if done incorrectly, his biggest disaster. If you’re thinking about selling your business, consider the advantages of using a business broker. An experienced, professional business broker will ensure confidentiality, attract the right buyers, negotiate the best terms, and bring your sale to a successful closing.

Business Brokers Ensure Confidentiality

If word gets out that you’re selling your business, the game could be over before it has begun. Employees will hear about you selling your business and may become distraught or leave. Customers or clients may lose confidence in your products or services and look elsewhere.

A business broker acts as a shield between the business owner and prospective buyers, keeping your identity and your business’ identity confidential while fielding all inquiries and vetting prospective buyers. A broker will ensure that vetted buyers sign strict non-disclosure agreements before they reveal the business’ identity or any further details.

Business Brokers Have Broad Access to Business Buyers

Experienced business brokers know the market for businesses like yours. They can activate a broader network of buyers than a business owner could on his or her own. You may know one potential buyer, but your business broker will know many and will make them compete to buy your business. Your job as a business owner is to keep your operation running successfully, maintaining or even increasing revenues, while your business broker does all the work involved in selling your company.

Valuation and Marketing

Your business’ market value is not just based on a mere statement of taxable income. Business brokers build a case for how buyers will make money for themselves in the future if they buy your business. The broker takes many factors into account. Cash flow (calculated as adjusted EBIDTA—earnings before interest, depreciation, taxes, and amortization) is a primary concern; however, valuation also considers things such as trends in your business sector, location, competition, and proprietary products or trade secrets, among others. It’s the broker’s task to analyze these and other relevant factors, derive the highest obtainable selling price, and then professionally package the business to attract prospective buyers.

Managing the Process

Another reason to use a business broker is that your broker will manage the sales process. Selling a business is much more complicated than selling real estate. There are many steps in the process and many obstacles to overcome along the way. Brokers solve problems as they come up (they always do!), manage all the moving parts, and keep the parties involved (buyer, seller, lawyers, accountants, consultants, and financial institutions) moving forward toward a successful closing.

You’re an expert in running your business; your business broker is an expert in selling your business! If you concentrate on running your business while your broker invests a very substantial amount of time to value, package, market, and sell your business, your sale is sure to be successful!