Why business owners should consider Half-Retirement

Two words, valuation gap. The lump-sum sales value of many small businesses is worth far less than the value of the income stream from the business. Many business owners simply cannot afford to sell. It’s not economically viable.

However, as business owners approach retirement age, the stress and daily grind of business ownership seems less tolerable, so they dream about flipping a switch and making it all go away.  That is, until they run the math and see that they will have to take a significant pay cut simply to end the daily headaches of business ownership.

Keep your income, ditch the problems via Half-Retirement

Sometimes business owners forget that owning a company and running a company are two different roles, not one. The CEO of Pepsi doesn’t own 100% of the company. She has a role as the leader of the company. The shareholders of Pepsi earn a return on their investment with no daily worries about the operations of the company. This is the shift you can make to turn your company into equity income from earned income.

How it’s done

Half-Retirement isn’t easy, but it’s incredibly rewarding. Imagine doing only the work you enjoy, ditching the work you hate, and keeping your income, and keeping the business asset. Pulling off Half-Retirement can dramatically alter your financial future.  See the math for yourself.

We have created several resources to help you on your journey to Half-Retirement. You can find them at the links below.

Half-Retire Webinar

Let’s Talk

The post The Definition of Half-Retirement appeared first on Half Retire.

What do you do when you want to retire and still be financially stable? How do you avoid allowing what you’ve worked so hard to achieve fizzle out and how will you ever feel content letting someone else take the reins?

The best way to tackle this is to seek advice from experts, learn about what to do next, gather your resources and overcome the challenge like any other day of the week.

The method behind successful Half-Retirement™

As part of our Half-Retirement™ training program, we’ve developed an easy six step process to give you a brief outline of how you are going to achieve success in this field.

This is just a taste of the tips and tricks that we’ve got in store for you so please, enjoy!

6 steps to Half-Retirement™

1. Adopting the Half-Retired™ mindset

When you have worked for something your entire life, it can be difficult to accept that one day you won’t just be able to walk into the office and do what you have always done. However, once you conquer this you can really start to enjoy your Half-Retirement™ more.

2. Finding your Picasso work

In order to get the most out of your Half-Retirement™ you should focus on the aspects that you enjoy most and where you matter most. The rest should be left in the capable hands of your staff.

3. Working towards doing only your Picasso work

Before you can get to a stage where you are only doing what you enjoy, you must tone it down in other areas. This is where you need to begin preparing for delegation.

4. Changing how you do business

In order to achieve your Half-Retirement™ dreams, you will have to make some alterations to the structure of your business model and your people model.

5. Creating a remote-control system

This is where you can start to prepare yourself for controlling your business from wherever you so happen to be. You may already have some remote-control systems in place.

6. Enjoying the spoils of your efforts

Truly enjoying your Half-Retirement and keeping it that way can be a task in itself, so make a point of learning how to keep your distance and when to put measures in place to restrict business from invading your pleasure time!

The more informed about Half-Retirement™ you are, the better off you’ll be

At the end of the day, this entire process is about informing you about how Half-Retirement™ works and what is the best method to do it comfortably.

You can learn about this method in more depth and discover what else awaits you in the wonderful world of Half-Retirement™. We have full confidence that, with a little guidance, you can master the technique and apply it to your situation – Then all that’s left to do is sit back, relax and reap the benefits!

The post An effective Half-Retirement™ process: 6 steps to enjoy the spoils of your efforts appeared first on Half Retire.

If you fully intend on keeping your business going at full capacity, then restructuring is necessary, so where do you start?

4 things to think about when restructuring your business for transition into retirement

The transitional process for retirement where you are still partially involved in your business can be referred to as Half-Retirement™. This is an essential stage in the retirement process where the objective is to begin to spend more time away from your company and on the things that you enjoy!

What is the current business structure?

First of all, you need to assess your current business situation. Who are the stakeholders in your business? How do you minimize the impact of your transition into retirement on them?

When looking at your business structure, direct your focus to the activities that you directly work on. What would not get done if you weren’t around? Who can you trust to make the decisions when you aren’t there?

These are questions that need answering.

It may help to keep a journal during this stage so that you can identify the tasks that you are part of within your business. From this information, you can then begin to envision ways that you can have your tasks covered by others.

Identifying skill gaps

Ask yourself this question: Will your absence leave a skill gap that isn’t covered by any of your existing members of staff?

If there is, then you need to consider your options for removing this problem. This could include promoting or training an existing member of your team either internally or externally or hiring a new person who already has the skill that you are trying to cover.

Failure to close skill gaps can result in confusion and bad decision making in your absence, so it always makes sense to be prepared. Think about what you bring to the table and find someone that matches what you are looking for so you can be confident that all of your boxes are ticked.

Handing over your basic admin roles

Administration is an essential part to any business owner’s full-time day. Most tasks that it includes are often seen as laborious and time-consuming.

If you are looking to Half-Retire®, then you need to consider your time to be more valuable than this by removing simple jobs from your to-do list and focusing on tasks that you are essential for only.

Give your pile on unchronologically ordered receipts to accounts in a plastic wallet. Tell the receptionist to organize your appointments and diary and stay a-tuned to only the essentials.

Making a plan to handover the rest of your work

When you put your Half-Retirement™ plan into play, you must always look for opportunities for people that can take the reins for tasks that you complete on a day to day basis.

The more specialist the work that you are handing over, the more responsibility you are trusting your staff with. This may result in you having to create positions, promote and give pay raises to your staff.

At the end of the day, they need to stay happy and motivated so that eventually they can run your entire business for you. To avoid issues, you should consider the potential cost and strategy for this in advance.

You may even want to get the opinion of your plans from the staff members that it affects and begin negotiating with them on what they would accept for such a position of responsibility or extra work. Look before you leap and you will be able to make more informed decisions which means your plans will be more likely to come into fruition.

Hiring a replacement

You may find that you struggle to cover everything that you do with existing resources. Your business could fall short in various areas without your input and you might be worried about the capabilities of your team members to manage alone.

If this is the case, you may want to consider outsourcing a new senior manager or director to fill your shoes. This person is likely to be more expensive than your average joe, but the right person will get the job done flawlessly and with a lot of attention to detail.

Hunting for someone who can take the heat like you will be no easy task, but they are out there! You can try various methods to track them down including:

• Recruiters
• Job and CV websites
• Agencies
• LinkedIn
• Networking events

Finding a replacement for yourself is not a process that you can rush, so take the time to really get to know your candidates before you decide to pile on the responsibility. You need to make sure that they are both comfortable and capable and you will be too!

If you think about all of these things and cover all of your bases before you decide to start spending less time in the office, then you are less likely to encounter problems. Your people will look after your business in your absence and eventually, you will only have to pop your head in when you are really needed!

After this stage is complete, you can relax and feel confident that everything will be taken care of whilst you are enjoying some well-earned time off with the family. Learn more about what is involved in the Half-Retirement™ process by getting in touch today.

The post How to restructure your business when retiring appeared first on Half Retire.

What if there was a way to extract more of that hard-earned equity? The Gentle Glide Plan does just that. Think of your business as an ultra-light plane. All the energy to get the plane in the air is equivalent to your first years in business. Now that the plan is in the air, significantly less energy can be used to maintain altitude. The same is true for your business. Energy and effort required by you can be dramatically reduced, and the plane may only lose a small amount of “altitude.” In fact, the plane may be able to gently glide with no energy added. It can take hours for a glider to finally come down to earth. You can pull off the same maneuver with your business with the Gentle Glide Plan for Half-Retirement.

Sometimes, we hear business owners question whether they have the significant equity in the business  to allow a gentle glide. You have spent many years building pockets of equity in your business. This equity is hiding in places you may not have even considered:

• Customer loyalty
• Brand equity
• Employee skills and training
• Employee loyalty
• Personal brand equity
• Business infrastructure and systems
• Financial leverage
• Best practices and trade secrets

During the Gentle Glide, you extract economic value by slowly decreasing your work effort. Your absence may create a small deficit, but the deficit is absorbed naturally by the ongoing  momentum of the business.  Customers “step up.” Employees step up. Vendors step up. The small void your absence creates is naturally absorbed as long as it is small.

Under the Gentle Glide Half-Retirement Plan, no major changes are made to the business. There is no need to hire someone to do the work you no longer do. There is  no need to officially shift responsibilities. You simply back off and work less.

There is probably  a scientific explanation why this process works, but to us it seems to be a combination of the Pareto Principle (80/20 Rule), human nature to pick up the slack, plus the inverse of “the work expands to meet the time allotted principle.”

The biggest difficulty business owners have with the program is consciously working less hard. They are so used to working hard that anything but hard work feels like laziness. A significant percentage of business owners feel this way. If you are struggling with feeling lazy, please remember all those late nights, the stress making payroll, and various other struggles you endured during the early years!

If you don’t believe this plan will work, try what we call “1/10^th Retirement.”  Take off one- half day off each week and see how it affects the business.  Remember to be patient, as there will be some issues immediately. Address the issues and fix the systems that broke in your absence. Give this process a couple of months. Make a list of every negative impact caused by your absence. Your list should look like the one below. (i.e. blank)

By continuing to tap the existing pockets of equity and momentum in your business, you can gently decrease your efforts without major disruption to the business and “glide” to Half-Retirement.

At some point, you may feel like the Gentle Glide Plan isn’t working well. Don’t worry, just switch to one of the other Half-Retire methods.

Learn Method 2: Mini-Me

The post Half-Retirement Method 1: The Gentle Glide appeared first on Half Retire.

What is the 44% Rule?

The vast majority of small businesses sell for a multiple of annual earnings. More specifically, they sell for two to five times annual earnings. Most business brokers will tell you that budgeting three times annual earnings is a good ballpark estimate for the sales value of your business.

After receiving your lump sum payment, you will have costs associated with the sale (brokers, lawyers, advisors, etc.) plus a tax bill. That will amount to twenty-five percent or so. Let’s use a business that makes $300,000 annually as an example. The math works like this:

$300,000 annual business income times 3X multiple = $900,000 sales price

$900,000 sales price less 25% expenses & taxes= $675,000 investible cash.

If you were receiving $300,000 annually from the business, you would need to make 44.4% investment return on your sales proceeds just to replace the income you used to receive from the business. Download an Excel spreadsheet to run the math.

Why does anyone sell their business?

(Read the full article – 5 Reasons Business Owners Sell When They Shouldn’t)

Read the full article here, but the short version is frustration. Sure, the income from the business is good, but the business owner simply cannot take the daily frustrations of business ownership anymore. So they take a lousy deal and hope for the best.

A new trend: Half-Retirement

The exit planning community predicted that a tidal wave of businesses would flood the exit market as baby boomers turned sixty-five.  Books such as The Ten Trillion Dollar Opportunity  predicted that there might be too many businesses for sale and cause an imbalance in the market.

This tidal wave never happened

(Read the full article – What Happened to the Tidal Wave of Boomer Businesses for Sale?)

To everyone’s surprise, many boomers did not exit their business at sixty-five. They didn’t pass  their business on to their kids. They didn’t do an ESOP. They didn’t do anything resembling an exit. Instead, they found a way to radically reduce the stress of business ownership and keep the income stream.

We call this the Half-Retire Revolution. By keeping control of their income stream, business owners are betting on themselves instead of insurance companies or the stock market. They are refusing to give up the outstanding returns they make on the investment in their business for miniscule bond returns.

By the same token, they are also saying “no” to typical business owner frustrations. By eliminating the non-financial reasons businesses get sold, the owner can enjoy work, enjoy retirement, and enjoy excellent income.

We have seen many business owners succeed in Half-Retirement. It’s not as simple as flipping a light switch; it’s a process. Here are the steps we have seen business owners take to accomplish Half-Retirement:

1. Eliminate key frustration points. If you cannot enjoy going in to work, you will eventually sell the business to end the frustration.
2. Reduce the business’ dependence upon your work. It’s alright to have the business depend upon your expertise, skill, judgment, and connections, but it’s not alright for the business to need your eight hours of work each day.
3. Grow your team into some of the work you currently do. We have a saying, “It’s never as simple as delegation.” There’s a reason you do the work you currently do and have not delegated it to the team. It’s complicated and tricky, BUT, it can be done with a system plus training, coaching, and patience.
4. Systematize everything. Most small businesses work because the owner IS the system. Invest in having the systems run your business instead of you running it, and you can escape the day-to-day grind.
5. Enjoy the spoils. Half-Retirement offers the best of everything: excellent income, security, and work-life balance. You have worked hard to build this business, now enjoy the rewards!

Sometimes, it’s hard for business owners to imagine anything but the day-to-day grind of the business. If you need some help, read this article: 6 Ways Business Owners Are Enjoying Half-Retirement.

The post The 44% Rule appeared first on Half Retire.