Your business isn’t just your livelihood—it’s potentially your most valuable retirement asset. Whether you’re planning to retire in a few years or just starting to think about your future, now is the time to ensure your business is structured to deliver the return you’ll need.
You may love running your business. But in the back of every owner’s mind is the knowledge that one day you’ll need to sell the company and retire.
So how can you guarantee that your business will be worth enough on the open market to fund the retirement you envision?
In this series, we’ll look at the core ways your business can be structured to deliver on your personal, family, philanthropic, and lifestyle goals—now and into retirement.
Creating a business that will fund your retirement plans
Your business has to be the nest egg that provides the equity for you to retire. But how do you secure that nest egg, protect the value of the business, and ensure your retirement plans are achievable?
We’ve highlighted five strategies that will add to the value of your business—so when the time comes to sell, you’ll get the return on investment (ROI) needed to retire comfortably.
1. Build a business that can run without you
You may be the boss, but your business needs to function independently of you to hold its value at sale. One way to do this is to systematise your operations, so the day-to-day procedures exist outside your own head and are scalable as the company grows.
It’s vital to train up a strong management team that can keep the business trading when you’re no longer in the picture. This autonomy significantly boosts the value of the company, as potential buyers want businesses that won’t collapse when the founder leaves.
2. Focus on recurring revenue streams
Recurring revenues give your business more stability. Think about focusing on subscription services and other predictable income sources to help build up value in the company.
Recurring revenue dramatically increases business valuation multiples—often 2–3 times higher than transaction-based models. By creating a stable, valuable business, you can sell the company for a premium price, providing the equity you’ll need to fund your retirement.
3. Invest in intellectual property and licensing
Having valuable assets in the business boosts the potential price of the company. Your intellectual property (IP) and brand equity are two intangible assets that can have a significant impact on the value and asking price when the company is put up for sale.
Think about developing products, processes, or technologies that can be patented and then licensed to other third parties. This is a great way to use your IP effectively, boost your brand, and create passive income—something that will appeal strongly to any potential buyers.
4. Keep detailed records and keep finances healthy
A viable business with a good financial health score is the holy grail for buyers. So keeping your financial health, company credit score, and cashflow position under control is vital.
It’s important to have rigorous financial tracking in place and to keep a close eye on your key financial metrics. Clean books with 3–5 years of strong profitability make your business significantly more attractive to buyers and can justify higher valuations and better ROI.
5. Create a strategic exit plan well in advance of retirement
The key to a successful exit is having an exit plan in place as early as possible. Work with your advisors to add value to the business, identify ideal buyers, and find the most tax-efficient exit structures that will deliver the funds you need on retirement.
Ideally, you should start this exit strategy at least 3–5 years before you intend to retire. This gives you time to think about succession planning, boosting the underlying value of the business, and making sure you’ll have sufficient capital for your retirement needs.
Secure your future by strengthening your business today
Retirement should be a reward for your years of hard work—not a time of financial uncertainty. By turning your business into a well-structured, valuable asset, you can retire with confidence and peace of mind.
Let’s talk about how to make your business retirement-ready.
About Pathfinder Solutions
Pathfinder Solutions advisory team members have either owned or managed businesses, or are investors themselves, so we know first-hand the challenges you face in your world.
Sure we’re Accountants, but the best solutions in business come from focusing on more than just the numbers. Our real-world business experience delivers just that.
