For small business owners, retirement requires diversification and early exit planning—not just expectations of a future sale.
Many small business owners assume selling their businesses will fund their retirement. But that’s not necessarily a strategy—it can be a risky proposition.
Why? Well, when most of your wealth is tied up in one place, your future depends on a single outcome. If you’re forced to sell during a downturn, while facing health issues, or simply before the business is ready, you may end up accepting far less than the business is worth. That’s the real risk of treating the business as the retirement plan: your transition ends up dictated by circumstances outside your control.
New data backs this up. A recent survey conducted by Equitable and SCORE found that six in 10 small business owners find it difficult to fully retire, even though nearly half started their businesses with that goal in mind.
It’s essential to carve out time to work on the business, not just in it, so it can eventually support life beyond the business itself. Small Business Month is officially behind us, but it’s not too late to get a fresh start to your planning. The earlier you start, the more flexibility you’re likely to have later on. Remember, exit planning is good business strategy.
The Mindset Shift Retirement Planning Requires
The first step toward retirement planning is recognizing that building a business and stepping away from one require different mindsets.
Running a small business demands a certain degree of faith, which, over time, can turn into a “don’t look down” approach. That mentality may work early on, but it becomes a liability if it prevents you from seriously assessing risk.
Another challenge is time. The day-to-day demands of the business create the “tyranny of the urgent.” Most owners don’t decide not to plan. They tell themselves they’ll get to it. In practice, they don’t. And when they do step back, the number of variables can feel overwhelming. Without structure, it becomes a problem that’s easier to postpone than to solve.
That’s where the right support matters, often involving a combination of financial professionals, a CPA, and an attorney, with the financial professional acting as the quarterback to turn a complex set of decisions into a clear sequence. Equitable and SCORE’s study found that small business owners who work with a financial professional expect to retire up to seven years earlier than those who don’t.
How To Start Planning Your Business Exit and Retirement
Most owners struggle to answer three fundamental retirement planning questions: What is my business worth? How much do I need to retire? What will I do after the business?
Until you can answer these queries, everything else is guesswork. Here’s how to find clarity:
Get a formal valuation. Start with a specialist. Too many owners haven’t had their business valued since their first round of financing. Instead, they rely on what I call a “country club valuation,” an emotional estimate based on what they’ve heard other businesses sold for. Even owners who know their numbers often focus on the “tax number”—income managed to minimize taxes—rather than the business’s real earnings power. Buyers care about this “real number.” A proper valuation adjusts for personal expenses and other add-backs to arrive at a more accurate picture of value. Without that number, you’re planning in the dark.
Define the gap. Estimate what you’ll need to fund retirement, including annual spending, healthcare costs, and the cost of life after the business—whether that means starting another venture, supporting charities, or investing in other businesses. For example, if you expect to need $600,000 annually, a simple 4% framework suggests you’d need roughly $15 million in assets to generate that level of income. If you already have $3 million outside the business, your gap is $12 million. Once you define the gap, you can start building a realistic plan to close it.
Improve the business’s value. Close the gap by making the business more attractive to a buyer. That means addressing anything that increases risk: poor financial organization, revenue concentrated among too few customers, undocumented or non-transferable processes, and a business that depends too heavily on the owner.
Nurture a buyer early. Don’t rely on a buyer to materialize at the right time. Identify whether your most likely buyer is internal, family, or external, and, if possible, start preparing them to take over well before you’re ready to sell.
Build wealth outside the business. Over time, consider withdrawing funds from the business. Diversifying into investment accounts, a retirement savings account, or a Roth IRA gives you flexibility and reduces your dependence on a single transaction.
Start now. Even a few years of planning is better than a few months, but the most effective exit plans evolve over time alongside the business itself. And remember, exit planning is good business strategy.
Take Control of Your Business Exit
Small business owners have a major advantage: flexibility. They generally have more control over how they earn, spend, and keep their money than W-2 employees likely will.
But flexibility only matters if it’s leveraged. Without a plan, more options create complexity, delays, and missed opportunities. If you don’t control your timing and your value, the market will do it for you.
Owners who understand what their business is worth, define what they need, and build a path between the two are far more likely to decide when and how they step away.
Stephen Dunbar III, JD, CLU, is Executive Vice President at the Georgia Alabama Gulf Coast Branch, Equitable Advisors, where he and his team are focused on helping individuals, families, and businesses achieve and sustain financial stability.
This article, which has been written by an outside source and is provided as a courtesy by Stephen B. Dunbar III, JD, CLU (AR Insurance Lic. #15714673), Executive Vice President of the Georgia Alabama Gulf Coast Branch of Equitable Advisors LLC, does not offer or constitute, and should not be relied upon, as financial, tax, accounting, or legal advice. Equitable Advisors LLC and its affiliates do not make any representations as to the accuracy, completeness or appropriateness of any part of any content hyperlinked to from this article. Your unique needs, goals and circumstances require the individualized attention of your own tax, legal, and financial professionals whose advice and services will prevail over any information provided in this article.
Stephen B. Dunbar III offers securities through Equitable Advisors LLC (NY, NY 212-314-4600), member FINRA, SIPC (Equitable Financial Advisors in MI & TN), offers investment advisory products and services through Equitable Advisors LLC, an SEC-registered investment adviser, and offers annuity and insurance products through Equitable Network LLC (Equitable Network Insurance Agency of California LLC). Financial professionals may transact business and/or respond to inquiries only in state(s) in which they are properly qualified. GE-8930559.1(05/26)(exp.05/30)
