Omaha, NE--Let’s face facts: one day we’re all going to retire, whether we want to or not! Some of us will do it on our own terms when we are good and ready, some will be forced into accepting a modest retirement due to poor health or poor decisions, while others will take their last breath behind the counter claiming until the end that it was their choice.
Even if you’re not ready to retire for a long time, getting a clear financial picture of your business and making a sound plan now is good business sense. More often than not, people who retire will have a healthy attitude towards retirement; i.e., they accept responsibility for their retirement and they have high, or at least comfortable, expectations, and they back their expectations up with a solid plan and a sense of urgency.
An effective retirement plan means this: being in a position to retire, financially, emotionally, and physically, and then choosing whether to retire or not.
Cash-flow is the name of the game in retirement. To enjoy a fulfilling retirement, you need ‘reliable income’ or cash-flow more than you need capital. Of course, capital helps, but too often we see business owners having to live on less money and hoping they won’t outlive their money. Here are some questions for you to consider. If something happened to you today:
How would it impact the lives of those people left behind such as your significant other; your children; your staff; your customers or your business partner?
What are your retirement options?
Before you go too far with any of these options, I urge you to seek guidance from a trusted financial advisor (not one who is trying to sell you an investment product) to establish your ‘required retirement income.’ Once you know this number, you can work back from your other known income sources, such as rental property, pensions, dividends, savings and other investments, to see how much you need from your business to top it up.
Let’s say you need $100,000 as a retirement income and you already have $50,000 from other sources. That means you need another $50,000 to come either from the capital you receive from the sale or closing down of your business. or from an ongoing passive income from your business.
The biggest mistake retailers make is over-optimistically valuing their inventory or the value of their business. Jewelry stores are not easy to sell nowadays, so it is rare to see them sell at a level that meets the owner’s expectations. With interest rates of approximately 2.3% for conservative investments (you can’t afford to be too speculative or bullish in retirement), you would need to clear in excess of $2m from your business to safely generate another $50,000 annual income for your retirement.
This makes the idea of retaining the business, what I call ‘exit without exiting,’ a more attractive option. Why would you sell your business to a new owner who is going to get their money back in four to five years (based on an expected 20-25% return) while you take that same money and get 2% - 3% if you’re lucky?
What can you do to start preparing for retirement? Create some urgency, no matter how far away you think retirement is for you. Tomorrow is not promised to any of us and ‘Hope’ is not a strategy. Regardless of which retirement option you choose, they all require a degree of 'grooming’ or 'positioning' the business to make it as attractive as possible to sell, close or keep.
You need to empower, trust, and enroll your team rather than doing everything yourself. Effective delegation takes time and it is not to be confused with abdication; i.e., you can delegate tasks, but not the responsibility.
It is wise to seek professional help along the way. Good legal advice can save you a lot of money and heartache just as good accounting advice can help resolve your taxation and compliance issues. Retail advice is also available to help you establish your retirement priorities and implement strategies to achieve them.
The first step in the retirement process is to set the timeframe. When do you plan/need to be in a position to retire? Even if it's not imminent, remember, hope is not a strategy and tomorrow is not a promise. Make it sooner than later. Next, establish the gap between your required retirement income and what you currently have in place. Then it’s a matter of defining, implementing and monitoring your retirement plan.
If you need further help with strategies and advice around this topic, please contact The Edge Retail Academy at Inquiries@EdgeRetailAcademy or 877-569-8657, Ext. 1.
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The Edge Retail Academy is a highly effective jewelry industry consulting company that provides customized strategies for retailers and vendors to increase profits, optimize growth, reduce debt, create profitable inventory solutions, build effective teams and enhance brand loyalty and profitability. The Academy is committed to helping jewelry businesses improve their bottom line while reducing uncertainty and stress. Edge Retail Academy software and the unique talent pool of their business advisors provide real world knowledge and advice for guaranteed results, all on a “no-contract” basis. www.edgeretailacademy.com.
David Brown is a native New Zealander who in three years tripled sales and net profit in a jewelry store he bought in Australia. He is an expert in the areas of inventory management, sales growth strategies, retail systems and staff management and, with the development of powerful industry- specific software, Brown can supply business owners with information and strategies to significantly improve sales, profit margins, control, and ultimately peace of mind. To reach Brown, call (877) 569-8657 or email firstname.lastname@example.org