By Scott Ford, CEO, Founder & Wealth Advisor of Cornerstone Wealth Management Group
Many business owners have lofty retirement dreams, but often they invest so much in their businesses that they neglect to save enough for retirement. One common misconception is that the sale of their firm will fully fund their retirement. But without knowing exactly what your firm is worth and how much you need to pay for your golden years, the equation may not work out.
Have you figured out exactly how much you need to retire when you want to? Do you know what your business is really worth?
Knowledge is Power
Many business owners have never calculated how much they will need to live the way they want to when they retire. If you don’t know how much you need, how will you know if you have enough saved? Unfortunately, determining your retirement goals isn’t as easy as plugging some data into an online calculator.
There are multiple unique factors involved that will affect the outcome, such as years from retirement, current savings, the economy, and retirement lifestyle expectations. Perhaps the most important factor is how much you’ll receive from the sale of your business. If you’d like to learn how much retirement will cost you, take our quick survey online now.
What is Your Business Worth?
According to the Q1 2016 Market Pulse Survey, the multiples paid for businesses in the $1 million to $5 million range vary from 1.5 to over 6 times Seller’s Discretionary Earnings (SDE)! This means that a business with SDE of $2 million may be valued anywhere between $3 million and $12 million. This range doesn’t give you much clarity when planning your cash flow in retirement.
Working with a business valuation specialist can give you greater clarity in planning for your retirement. The proceeds you’ll receive from the sale of your business may depend on your industry, the size of your company, its profitability, your location, the structure of the deal, and more. At Cornerstone Wealth Management Group, we work with specialists in business valuation and seller representation to maximize the value you receive for the sale of your firm.
Know Your Savings Benchmarks
Knowing how much you may receive for your firm is half the battle. The next piece of the puzzle is to determine how much you’ll need for retirement. Take a glance at the chart below. Instead of showing you what you should save monthly from here on out until retirement, it lets you know if you are on track by looking at what you have saved up until now. From there, you can evaluate what you need to do if you are behind.
Using a benchmark like this one personalizes your progress by reflecting how much you will need in retirement based on your actual circumstances. Many people rely on Social Security or pensions to provide the bulk of their retirement income, but the more you earn, the less Social Security you will receive, so what you need to save to retire on time will change based on your pre-retirement income.
Take the First Step
One in four business owners have no idea how much they need to save for retirement. If this is you, the first step is to consult with a financial professional that can help you plan for both the sale of your business and your other income sources.
At Cornerstone Wealth management Group, we work with business owners to plan for a secure retirement. To learn more, take our quick survey to determine how much financial freedom will cost you. If you have questions, contact me at (301) 739-8505 or by email at [email protected].
ABOUT SCOTT
Scott Ford is CEO, Founder and Wealth Advisor of Cornerstone Wealth Management Group, serving entrepreneurs, business owners, executives, and their families. The firm specializes in business liquidity strategies and SBA financing strategies. It is Scott’s mission to help his clients pursue financial freedom and live a balanced and fulfilled life.
Scott is a Wealth Advisor and Registered Financial Consultant (RFC). He was recognized as one of the 20 Rising Stars of Wealth Management by Private Asset Management Magazine in 2008 based upon assets managed of $1 million or more per client. Since 2005, Scott has been an active financial technical analyst.
Clients often choose to work with Scott because of his experience with the challenges business owners and executives face as well as his firm’s disciplined process. His personal and proactive approach is designed to bring clarity and simplicity to the complex issues of financial management. For over 20 years, he has been helping his clients define and pursue their own unique version of “True Wealth.”
Scott is the author of three books: Financial Jiu-Jitsu: A Fighter’s Guide to Conquering Your Finances, The Widow’s Wealth Map: Six Steps to Beginning Again, and the New York Times Bestseller, The Sustainable Edge: Fifteen Minutes a Week to a Richer Entrepreneurial Life.
He and his wife, Angie, reside in Hedgesville, WV and have two wonderful children as well as a dog and a cat. In addition to spending time with his family, Scott is a voracious reader and enjoys woodworking, Brazilian Jiu-Jitsu, golf, hunting, permaculture and beekeeping; basically anything outdoors.