Planned Retirement vs. Burnout

The Difference to Your Finances Will Be Significant

by Dave Driscoll

In a recent Market Pulse Survey published by the International Business Brokers Association (IBBA), M&A Source and the Pepperdine Private Capital Markets Project found that retirement is the No. 1 reason that sellers put their businesses on the market.

That’s not surprising given that the baby boomer generation is now reaching retirement age.

The second most popular reason given for selling is burnout.

Reasons No. 1 and No. 2 beg the question: Which feeling came first to the business owner – burnout or the desire to retire?

The sequence of events can definitely have an effect on the value received for the business to support the owner’s financial needs in retirement.

1. Planning for your retirement takes time and preparation. Realistically defining your lifestyle, the cost of that lifestyle, the value of your business, and your anticipated tax structure when you sell the business (because, as you know, what matters is not what you sell it for; it’s what you keep) is critical in planning for your retirement.

Then, what if during your preparation you find that the amount of after-tax value unlocked from your business, combined with other personal assets, is not enough to support your lifestyle objectives? What do you do?

If you are in the early planning stages, you still have the opportunity to correct course and increase the probability of reaching your objectives.

2. Burnout, the second most common reason owners sell, can present challenges to achieving the lifestyle objectives you dreamed about for retirement.

In the majority of cases, owners who reach burnout have not completed much, if any, planning. By definition, “burnout” indicates an owner has stayed in the game too long… and in our experience, the value of the business has already suffered.

Diminished value due to burnout is a double-edged sword. You are unhappy because you are working at something after you’ve lost your passion – and the loss of passion has usually led to a decline in business value, detracting from the finances you need for retirement. Owners feel miserable and out of good options at that point.

I understand it’s easy for me to say, but you need to ask yourself the question: Where am I going with my business, and when do I want to do something else?

Honestly jotting down your thoughts is a start. Then work with your financial adviser to outline your individual financial needs in retirement and how much money you will need to have invested to achieve those goals. Next hire an M&A broker/adviser to perform an objective market valuation of your business. Find out what value the market places on your company while you may still have time and options to increase the business value.

I speak from personal experience; I operated my manufacturing business way too long after my passion and energy were burned out, and I paid the price in missed opportunities and diminished value.

I encourage you to take the time to understand your priorities, needs, emotions and options. If you are in burnout mode, act now! The longer you wait, the more frustrated you will become and the more of your hard-earned value will disappear. The dollars lost in business value are virtually impossible to recover in retirement.

Dave Driscoll is president of Metro Business Advisors, a mergers and acquisitions business broker, business valuation and exit/succession planning firm helping owners of companies with revenue up to $20 million sell their most valuable asset. Reach Dave at DDriscoll@MetroBusinessAdvisors.com or 314-303-5600. For more information, visit www.MetroBusinessAdvisors.com.