Small Business Owner Retirement: Dealing with an Unexpected Exit

Edward Goldstein |

As a small business owner, you’ve spent many years building your business from the ground up, working through the highs and lows of entrepreneurship. Now, as you’re nearing retirement age, it’s time to think about an exit strategy. And while you might have been planning your retirement for many years, there may come a time when you need to retire earlier than expected—whether it’s because of health, a sudden downturn in business, or a family emergency. If you unfortunately are facing an unexpected exit, here are some of what you need to do.

Evaluate Your Financial Situation 

The most important thing to do when facing an unexpected—and potentially early—retirement is to obtain a full grasp of your financial situation. First, review the non-retirement funds you have available. 

How does your current financial situation compare to where you want to be at retirement? What gaps do you need to fill? Will you have access to your retirement savings accounts right away or will you need to supplement your income in other ways? You may consider claiming Social Security earlier than planned, but keep in mind that your payments will be larger if you’re able to delay, even for a few months.

Not only should you consider where you are in terms of savings goals, but also in terms of expenses. Is there debt you still need to pay off? If so, you may consider consolidating or refinancing that debt to ease the financial burden. Do you have a plan for your health needs? If you’re younger than 65 you won’t be eligible for Medicare, so it’s important to research other health plans available to you, especially if your early exit is because of a medical issue. 

Once you’ve taken stock of your financial health, you can make informed decisions about what’s next for your retirement and your exit from your small business. 

Plan Your Exit 

Depending on your age and the size of your small business, you may already have an exit plan in place. In that case, take a look at your plan to figure out if it still works for your situation. If you don’t have an exit plan, now is the time to set one. 

However, before proceeding too far down any of these roads, it is essential to obtain an unbiased business appraisal. 

There are a few options for exiting your business, including: 

  • Liquidating the business 
  • Selling the business to someone you know 
  • Selling the business to another business 
  • Selling the business in the open market

It’s essential to consider the state of your business before planning your exit strategy. Each strategy has its pros and cons. Liquidating your business can be the quickest way to exit, especially if you’re dealing with financial strain, but it’s not always the most profitable plan. Alternatively, you may consider selling your business to a family member or close friend who knows the business well for an easy transition—but be aware that selling to someone you know can be complex and has the potential to put a strain on your relationship. 

Consult a Trusted Professional 

Above all, consulting a financial professional, like myself, is the best way to handle an unexpected or early retirement from your small business. As a Certified Financial Planner, CFP, I can help you evaluate your financial situation and your needs moving forward, as well as educate you on all potential exit strategy options and pitfalls. Having a trusted professional in your corner, especially involving a small business transition to family and friends, is a great way to get an outside, objective perspective on your best options for retirement. 

If you would like to discuss/explore your own situation, use the "Click for a Free Consultation" button.

Edward C. Goldstein, CFP®, MBA, President
Financial Life Planning, LLC
10,000 Lincoln Dr. East, Suite 201
Marlton, NJ  08053
Phone: 856-988-5480
Fax: 908-292-1040

*This content is developed from sources believed to be providing accurate information. The information provided is not written or intended as tax or legal advice and may not be relied on for purposes of avoiding any Federal tax penalties. Individuals are encouraged to seek advice from their own tax or legal counsel. Individuals involved in the estate planning process should work with an estate planning team, including their own personal legal or tax counsel. Neither the information presented nor any opinion expressed constitutes a representation by us of a specific investment or the purchase or sale of any securities. Asset allocation and diversification do not ensure a profit or protect against loss in declining markets.