Ask yourself these questions as you begin to create a plan to help meet your needs.
What's your company's real value?
Many privately held companies reflect the people who've built them. In some cases, the owner is the business, begging the question: Can your business survive after you sell it? As you assess your company, Anderson suggests thinking about what your business is actually worth. Consider whether that value could be enough to base your retirement on, notwithstanding other savings and investments that you may have.
“If you conclude that the company is viable without you there to run it, your next step is to get an accurate valuation of its worth,” says Joe Astrachan, emeritus professor of management at Kennesaw State University in Georgia. That's essential not just for a sale but also in consideration of taxes and to help you gauge how much retirement income you might expect. A professional valuation and tax expert can help you look past your emotional attachment to the company, gauge its true value as well as the market for such a business, and arrive at a realistic number.
What are your retirement income needs?
If you're planning on selling your business, Anderson advises that you determine how much income you'll need to support your lifestyle and retirement goals and what portion of that will come from the sale of the business — as compared with your investments and other assets. Keep in mind, too, that merely matching your current salary in retirement may not be enough if the business has also been paying for things like health insurance, car leases, club memberships and tax preparation — expenses that you'll have to start covering yourself. “Some owners may be used to living a $400,000 lifestyle on a much smaller income from the business,” Anderson says. “It can be a shock to discover what it costs to replace those things.”