5 Things Every Business Owner Should Do Within 10 Years Of Retirement

Introduction: Transforming Business Success Into Retirement Security

For entrepreneurs, the journey from business builder to retiree requires a fundamental shift in mindset. While you’ve spent decades nurturing your company’s growth, the final chapter of your business career demands an entirely different focus: transforming your life’s work into lasting financial independence.

The decade leading up to retirement represents a critical planning window. Decisions made during this period can dramatically alter your retirement reality, potentially adding millions to your nest egg or, conversely, leaving substantial value unrealized. Many business owners approach retirement with the same improvisation that served them well in business building—a strategy that rarely yields optimal results for business transition planning.

1. Define Your Retirement Vision with Clarity

Building a successful business without a clear vision is nearly impossible. Similarly, planning your exit without defining what lies beyond is a recipe for disappointment. The starting point for effective retirement planning isn’t financial—it’s personal.

Financial Independence Requirements

Your retirement vision directly determines your financial requirements. Consider how much annual income will support your desired lifestyle and how long you might need these resources. Family history can offer clues about longevity planning. Also consider whether you plan to work part-time, consult, or launch another venture, and what legacy you hope to leave for family, charity, or community.

A comprehensive retirement vision must include realistic expense projections. Many business owners significantly underestimate retirement spending, particularly in healthcare, leisure activities, and the impact of inflation. Working with a financial advisor to model various retirement scenarios can provide clarity on the assets required to support your vision.

Psychological Readiness Assessment

For many entrepreneurs, their business isn’t merely a source of income—it’s a cornerstone of identity, purpose, and community. Before developing transition strategies, honestly assess your psychological readiness to separate from your company.

Develop specific post-business plans for social connections outside your business network and projects that will provide meaning and purpose. Consider gradual transition possibilities if immediate retirement feels too abrupt. The most successful transitions typically involve business owners who have developed identities and interests beyond their companies well before their exit date.

2. Obtain a Professional Business Valuation and Enhance Value

Many business owners operate for decades without knowing their company’s true value. This knowledge gap becomes critically expensive as retirement approaches.

The Professional Valuation Advantage

A professional business valuation provides much more than a simple number. It delivers an objective assessment of your business’s current worth, identifies value drivers specific to your industry, provides benchmark comparisons with similar businesses, and creates documentation for potential buyers, lenders, or family succession planning.

While business brokers often provide free “valuations,” these typically serve as sales tools rather than comprehensive analyses. A truly independent valuation from a certified business appraiser or valuation-focused CPA provides unbiased insights worth many times its cost.

Strategic Value Enhancement

The valuation process often reveals specific opportunities to increase business value before sale. With several years to implement changes, you can systematically address factors that diminish value such as:

• Overreliance on the owner for key customer relationships, sales, or operations
• Inadequate management depth or succession planning
• Customer concentration where a few clients represent excessive revenue percentages
• Outdated systems, technologies, or inefficient processes
• Unresolved legal, regulatory, or liability issues

Even modest improvements in business fundamentals can significantly impact valuation multiples. For example, implementing systems that reduce owner involvement might increase the business’s value by 30-50% by making it more transferable to new ownership. Working with specialists in exit planning can help identify and prioritize value-enhancement opportunities, typically yielding returns many times the cost through increased sale price or improved transition outcomes.

3. Build Substantial Retirement Assets Outside Your Business

Perhaps the most dangerous retirement planning mistake business owners make is overconcentration—having too much wealth tied to their company. While your business represents your life’s work, it shouldn’t represent your entire financial future.

Diversification Imperatives

Not all businesses which are listed actually sell. Even successful business transitions rarely deliver the full value owners expect. Diversification isn’t merely prudent—it’s essential protection against transition risks.

These risks include economic downturns affecting business value, industry disruption or competitive threats, health issues forcing premature exit, buyer financing challenges, and extended time-to-sale exceeding expectations. Building assets outside your business provides crucial financial security regardless of how your business transition unfolds.

Retirement Plan Maximization

Business ownership offers unique opportunities to build tax-advantaged retirement assets. Depending on your business structure and circumstances, consider maximizing 401(k) plans with profit-sharing components, defined benefit plans that may allow significant annual contributions for older owners, or cash balance plans that combine defined benefit and defined contribution features.

For business owners in their final decade before retirement, catch-up provisions and age-weighted contributions can dramatically accelerate retirement plan funding, creating substantial tax-advantaged wealth outside the business.

Investment Diversification Strategies

Beyond qualified plans, consider systematic diversification through taxable brokerage accounts for assets requiring flexibility, real estate investments providing income and appreciation potential, and appropriate cash reserves for opportunities during transition.

Establishing automatic transfers from business profits to personal investment accounts prevents the common pattern of continually reinvesting everything back into the business. While reinvestment drives growth, balancing business investment with personal diversification becomes increasingly critical as retirement approaches.

4. Develop Your Exit or Succession Strategy

With retirement vision defined, business value understood, and diversification underway, you can develop a transition strategy tailored to your specific circumstances.

Third-Party Sale Preparation

Selling to an outside buyer typically maximizes cash at closing but requires extensive preparation. This includes maintaining clean financial statements for 3-5 years (audited or reviewed statements strengthen buyer confidence), documenting operational processes and key customer relationships, building a strong management team capable of operating without owner involvement, and creating a growth strategy that extends beyond current operations.

Start assembling a transition team including a business broker or M&A advisor, transaction attorney, tax advisor, and wealth manager. These professionals can guide you through the complex process while minimizing tax consequences and maximizing net proceeds.

Family Succession Planning

Transitioning to family members requires different preparation than third-party sales. This includes honest assessment of successor capabilities and interest, structured leadership development for family members, clear separation of family and business governance, and fair treatment of non-participating family members.

Family transitions often benefit from participation in family business organizations, working with specialized family business consultants, and creating formal governance structures like family councils or boards with independent directors to manage the complex intersection of family and business dynamics.

Employee Transition Options

Employee Stock Ownership Plans (ESOPs) and management buyouts offer alternatives worth considering. ESOPs provide tax advantages while creating employee ownership, while management buyouts leverage the knowledge of those already running the business.

Seller financing often plays a key role in making these transitions feasible. These options frequently permit staged exits where you gradually reduce involvement while maintaining income streams and influence during transition years, creating a smoother handoff for all parties involved.

5. Conduct a Comprehensive Risk Management Review

As retirement approaches, protecting what you’ve built becomes paramount. A thorough risk management review ensures that unforeseen events don’t derail your transition plans.

Personal Insurance Assessment

Review your personal insurance portfolio with transition planning specifically in mind. This includes life insurance for estate liquidity or business transition funding, long-term care coverage to protect assets from healthcare costs, and health insurance strategy for the gap between retirement and Medicare eligibility.

Insurance needs often change dramatically during transition years. Policies purchased decades earlier may no longer align with your current circumstances and objectives, making a comprehensive review essential.

Business Protection Strategies

Business-specific protection should address transition-specific risks including key person insurance covering essential team members during transition, business overhead protection ensuring continuity during owner absence, and buy-sell agreements funded with appropriate insurance.

Many business transactions are derailed by inadequate risk management, particularly when buyers discover uncovered exposures during due diligence. Addressing these issues before they emerge is crucial for a successful transition.

Asset Protection Planning

As your wealth shifts from business to personal assets, protection strategies should evolve. This includes appropriate legal entities separating business from personal assets, strategic use of trusts for wealth preservation and transfer, and coordination between estate planning and business transition objectives.

Working with legal and financial advisors experienced in business exit planning can help identify and address potential vulnerabilities before they threaten your transition success.

Work With Us

The final decade before retirement represents both opportunity and risk for business owners. Thoughtful planning during this period can dramatically improve outcomes, while improvisation often leads to disappointment. By defining your retirement vision, understanding and enhancing business value, building assets outside your company, developing a clear exit strategy, and managing risks comprehensively, you create the foundation for a successful transition from business owner to retiree.

At Avior, we specialize in guiding business owners through this critical transition period. Our team understands the unique challenges entrepreneurs face when transforming business success into lasting financial independence. We offer comprehensive planning that integrates business valuation, exit strategy development, tax optimization, investment management, and estate planning into a cohesive approach tailored to your specific circumstances.

Don’t leave the final chapter of your business journey to chance – contact Avior today. Our advisors will help you with the complexities of business exit planning, helping ensure that your decades of entrepreneurial effort translate into the retirement security and legacy you deserve.