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Four Steps to a Happier, Successful “Business” Retirement


Shutterstock_339672998As CPA financial planners and advisers, we spend a considerable amount of time addressing the technical aspects of IRAs, 401ks and defined benefit plans. We work to convert enterprise value into retirement assets. We consider diversification, funding strategies and tax implications.

Those issues are important, but it can be the personal and emotional aspects of helping your clients retire from their businesses that set you apart from other planners. Here are four critical steps to help you be a better partner to your clients who own a business.

Step One: Adjust the Conversation

The first step, and for many retirees the hardest one, is the mental adjustment of retiring after decades building a business and creating value. Then, one day, they sign a contract and turn those work responsibilities over to others.

Many then wonder, “What’s my purpose?”, and the answer can be difficult. Golf and travel are enjoyable, but they are not enough for many retirees. As their adviser, you can help a great deal simply by starting the conversation.

For example, ask your client something like this: “Is there a dream you’ve always had, but couldn’t pursue while you were building the business?” Clients must define this picture, but you can suggest the coloring by providing insights from their practice, creating a new frame of reference and encouraging an open dialog.

Step Two: Define Success

When we ask a retiring client to create a “purpose statement”, we get a few funny looks.

We create a financial plan with asset allocations, income streams and Monte Carlo projections that extend many years into the future, so why not also create a mission statement for the next stage in life?

Start by asking some basic questions: What are your personal goals? What are the expectations of your spouse, children or grandchildren? Do you have a favorite charity? Discuss these issues early in the process and put the answers in writing. Even though this sounds like a formal approach, the process gives the client more control to determine his or her future. From experience, I can tell you they really enjoy the journey.

Step Three: Identify Successors

If your client owned his or her own business, the next step is selecting who will inherit or purchase the business, who will run it, and what, if any role, the retiree will play going forward. This decision may require balancing family relationships, financial expectations and hopes for the business.

Most owners want the business to go to someone who will add value, not just inherit and live off of it. Children may have differing or competing ideas about the future of the business, and conflict is not unusual.

That is why organizing a formal meeting can be helpful. Participants should be encouraged to discuss their expectations, ask questions and express their concerns. I encourage what we call “intentional listening:” connecting with clients to help identify and address potential problems with the transition.

Step Four: Implement the Changes

The final step initiates the formal process of shifting the client’s role from owner to retiree. If you have addressed the first three steps carefully, you will have gained the retiring businessperson’s confidence and this should be a smooth transition.

After all, by now the client knows his or her direction and purpose, the financial situation and the future direction of the business. To guide this final step, develop a process checklist and address options to liquidate assets, such as the enterprise value of the business.  Communicate with the seller and buyer as to assets of value that are not integral to the continued operations of the company. These assets may be sold prior to the transition of successor management operations.

AICPA members can access this sample checklist and can use it as a guide – and you can customize it to your own needs and the needs of your clients.

A good financial adviser can handle the technical aspects of a business retirement. To become a true partner, go a step further and tackle the personal and emotional challenges faced by your clients. These four steps are part of a webinar I recently presented “Retirement Planning for the Business Owner.” Members of the Personal Financial Planning Section may access the recording and slides here.

Jimmy Williams, CPA/PFS, president and founder, Compass Capital Management, LLC. He specializes in creating plans for retirees and near-retirees utilizing tax-efficient strategies. Jimmy has written technical articles for U.S. News & World Report, The Planner Newsletter, Tax Adviser, CPA Insider and the Journal of Financial Planning. As a national conference speaker, he has authored and presented courses in professional ethics, tax planning, leadership, motivation and financial planning techniques.

Retired couple image courtesy of Shutterstock

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