If you have started your own business successfully and the business is turning a profit, you should already be considering how you will leave the business. It does not matter if you plan on retiring in a year or decades from now—a good plan for leaving your business should start when you begin running the company, not when you are looking for a way to retire. Experts call this an exit strategy, and there are many different options for how you can retire, depending on what key components of the business matter to you. There are also financial issues you must prepare for.
Succession planning refers to business strategies for replacing vital business leaders with new talent and direction so the business can continue to succeed. Most succession planning teams work for large corporations and attempt to replace retiring executives, but you can create your own leadership development program to prepare for your retirement. This program should seek out talented employees, find those best suited for positions of leadership, and begin training them for promotion when you leave. You can help this process by sharing your experience and ideas through mentoring relationships with key employees.
A full exit strategy occurs when you leave the business entirely. This typically means selling the entire business, all stock you have in it, and walking away without any remaining position or interest. There are key benefits to this move. You can retire fully and not worry about the business, leaving plenty of time for favorite retirement activities. The key here is cash in pocket, or the profit you make from the business sale. You should begin business value forecasting years in advance and work on upgrading key features of the business to make it more attractive for investing companies.
A partial exit occurs when you retire, but not fully. You may keep stock in the business (and therefore voting rights), tying your future financial success to the success of the business. You can also keep working part time in an advisory or consultant position. This way you can still make money and still keep an eye on the business you created. This method often creates unexpected stress in the retirement lifestyle, but works well if you want the business to expand when you are gone.
When you own your own business, you must file your retirement plans with the Social Security organization. Social Security must know if you are really retiring, if you are at retirement age, and if you stay on how much money you make part time at your business. If you retire before retirement age but make above a certain amount per year, Social Security will begin to subtract funds from your Social Security payments when you become eligible.