Finding the time to sit down and work out a retirement plan is tough when you’re already busy working with clients—plus, when your business is just starting to take off, retirement seems pretty far away!
If you worked for a bigger company before starting your own business as a design professional, retirement planning is probably familiar ground. But there’s one major difference: now that you’re the owner of a small business, the responsibility is totally on you.
The prospect might be daunting, but don’t worry—we’ve got tips to get you started on a sunny future for both you and your business.
Where is my design business going?
This is the big question you have to ask yourself before you start creating a retirement plan. You’re the business owner, so when you retire, what happens to your business? Will you close up shop? Will you sell it? Will you pass it on to younger relatives? Will it go to a partner or junior employee? Will you continue to own shares?
You probably won’t be able to settle this right away, especially if you’re just starting out in the design business. It’s impossible to predict exactly what your business will look like years down the road, and as it changes your plans for transferring your business will also change.
Still, you’ll need some sort of goal to organize your retirement planning, so think about where you’d like to see your business after you retire and aim to work towards that.
My business is my baby—I can’t sell out!
Tons of people feel this way, and for good reason. After putting so much time, money, and effort into your business, the thought of letting it go to someone else can be horrifying! Plus, one of the big benefits of creating your own business is getting full control over every single decision, and letting go of that can be tough. What if the new owner completely overhauls the personal flair you worked so hard to create? Worse, what if they just ruin the whole thing?
Luckily, retiring from a small business doesn’t just mean a choice between selling out and working forever. Some buyers are willing to negotiate a deal where you’ll hold onto part of the company or retain some limited management involvement, if it’s the business side of things you can’t bear to lose. On the other hand, if you’re interested in scaling back your involvement but still taking on a few clients, you might want to negotiate a deal where you step down from ownership and become a part-time employee in your own business!
Passing the business on to someone in your family is another option that keeps you close, but planning for it can be tricky. Don’t assume that your son, daughter, niece, nephew, cousin, or other relative will want to take on your design business—we’ve all seen enough Hollywood movies to know how that ends! Instead, be realistic and figure out a backup plan in case your relatives decide they have different dreams to follow.
But how do I make my business attractive to buyers?
Aside from running a profitable, well-marketed business, the most important way to make your business appealing to a buyer is to grow. Let’s face it: a one-person business just won’t sell, and certainly not for enough to support your retirement lifestyle.
If you’re planning on selling your business when you retire, you’ll need to start thinking about taking on employees. Even though you might not be ready to start hiring yet, setting out some goals for growth early on helps to make sure you’re on track for creating a business that’ll sell for a good profit.
When’s the best time to start looking for buyers? Pretty much as soon as possible. Yes, we know you won’t be retiring for years, but keeping an eye out for potential buyers means you’ll be well and truly prepared to sell when the time comes. This way, you’ll avoid scrambling to sell (and losing out on a good price in the process) when you decide you’re ready to step down.
Okay, I’ve got a goal for my design business. Now how do I save for it?
Your options for retirement savings plans will depend on your business and on where you live, since different countries have different retirement plan setups, so you’ll need to do a little research of your own.
Luckily, the best way to get started on picking a retirement plan is simple: just go talk to a financial advisor. Unless you’re an expert on finances, investments, and savings, getting professional advice is the easiest way to make sure you’re going with the best possible decision for you and your business.
If you’re planning on financing your retirement by selling your business, the first step will be figuring out how much your business will be worth. This is tough to estimate, even for finance experts, so aim to get an approximate range where you can expect your business’s value to land. That way, any economic changes won’t mess up your whole plan.
Does selling your business mean you don’t have to worry about saving? Sorry, no. You’ll still need some sort of retirement savings plan (again, this is where the financial advisor comes in really handy)—and remember, once you start growing, you won’t just be responsible for looking after your own retirement!
Do you want to learn more about turning your creative flair for design into a real business? QC Design School’s courses include the design and business training you need