In my twenty-year career, I have advised and worked with entrepreneurs from all walks of life, of all ages, from all sectors of activity and from all regions. I have come to the conclusion that many of them have common traits, particularly with regard to their relationship to retirement. While it is not uncommon for employees to associate retirement with freedom, entrepreneurs regularly experience the opposite. Their challenge: to find new meaning in a suddenly exceptionally empty schedule.
Building a business generally requires a passionate spirit and a challenging personality. Even when the company reaches the stage of growth or maturity, its owner continues to live a daily life strewn with obstacles, alternating between series of successes and series of failures. Moreover, with the freedom and a certain aura of prestige linked to the active life of the entrepreneur, it is not uncommon for the idea of retiring completely to generate an inner dilemma. How to decide between the desire for a profitable financial transaction thanks to the sale of the company and the fear of thus signing the end of a glorious epic?
I started my career with economic development mandates, and I remember that the transfer of businesses in Quebec and the possible lack of succession were already major challenges, and had been for a long time. Two decades later, it is true that the training and support offer, both for sellers and buyers, is well established and accessible. But any potential buyer who has “shopped around” for existing businesses to acquire also knows that, despite impressive statistics on the potential number of businesses to be transferred, the realization of a concluded transaction is far from guaranteed.
Selling a business results in a significant change in social status. It also means accepting a rhythm of life – both socially and financially – that is generally more peaceful. The entrepreneur accompanied by tax and financial experts already knows that the success of the transaction requires preparation of at least two years, but ideally often much longer.
Perhaps, however, he underestimates the importance of mental and psychological support in addition to his team of tax experts, lawyers and financial planners. The more an entrepreneur’s daily life revolves around his business, the more carefully he should prepare for the integration of new activities, new relationships and new personal goals in anticipation of retirement.
The company as a retirement plan
“My business is my pension fund. This assertion, spontaneously stated by many business owners, may indicate excessive personal financial risk-taking. The company’s profits are reinvested in order to achieve continuous growth objectives. Entrepreneurs must keep in mind that their personal financial enrichment should not depend solely on the possibility of reselling the shares they hold in their company one day.
A balance must be found between effective management of the company’s liquidities to support growth projects and the good financial health of the company. Not to mention the importance for shareholders to ensure that they are adequately remunerated.
The pension plan has the characteristic that you regularly contribute to it, each year, a portion of your income. The company as the main asset for retirement is distinguished rather by the fact that its market value is absolutely theoretical. Thus, shares can be worth several millions “on paper” whereas their real value will not materialize until a buyer is ready to take the risk of paying them in hard cash.
For many heads of small and medium-sized businesses, the assumption of selling stocks should not be included in retirement scenarios. Personal financial planning strategies should be adopted as soon as possible by the entrepreneur to compensate for this uncertainty. Depending on the personal and family situation, a plan should be drawn up to optimize the shareholder’s tax situation to maximize his remuneration and his personal and/or corporate savings vehicles, as the case may be. In doing so, selling the shares at their full and fair market value will only facilitate or advance the achievement of financial independence and retirement goals.
In short, the successful entrepreneur knows how to take risks to ensure the growth of his business. All the same, he must remember that he is also its employee. Investing with heart and passion does not mean forgetting that it is the company that works for the entrepreneur and not the other way around. If he overflows with courage, ambition and has an exceptional ability to take on many responsibilities, this entrepreneur should also have the wisdom to surround himself with a team of experts to support him humanly and financially so as not to be under -estimate the importance of preparing for retirement.