I Want to Retire

What does “I want to retire” mean for a family business owner?

For some it means the traditional view of stopping work entirely, but it is not always that clear cut.  For others, retirement might be better defined as ‘stepping back a bit but keeping in touch with the business and always being available if needed.”

If you are involved in either planning for retirement or helping someone else to do so, you might find the following discussion involving with Mr/s Jones to be helpful.  Mr/s Jones of course does not exist, but you might recognise him or her.

Mr/s Jones:     I want to retire.

Adviser:           Why?

Mr/s Jones:     Well, a lot of people, including my family, have told me that I deserve to take things a bit easier and, you know, I am at what some politely call, retirement age.

Adviser:           What would you do if you retired?

Mr/s Jones:     I’ve got plenty of things to fill my time. I’d like to see more of the family, spend a bit more time pursuing hobbies and use our holiday home.

Adviser:           Sounds great and you deserve it after all your work. Can I ask, would you still want to be involved in the family business?

Mr/s Jones:     Not much. Maybe just a bit, you know, now and again. Just to help, but I’d definitely not want to get in the way.  I could perhaps stay on as a consultant or non-executive director.

Adviser:           So, you want to retire but stay involved in the business.

Mr/s Jones:     Yes.  There’s nothing wrong with that, is there?

Adviser:           Nothing at all.  Have you discussed this with your family?

Mr/s Jones:     It’s really the family who have been pushing me to retire. They all think it will be good for me.

Adviser:           OK, but have you discussed your idea of retirement with them? 

Mr/s Jones:     I don’t think the family would want to push me out completely and they would probably expect me to remain involved in some way.

Adviser:           I get that but have you discussed it with them and agreed things like what days you will come in and who’ll make the big decisions?

Mr/s Jones:     We don’t really discuss these things much as a family.  It’s always been assumed that this is what would happen. Or at least I suppose I’ve always assumed that I’d retire this way.

Adviser:           Do you think that there’s a chance that the family might have a different understanding of your retirement? Anyway, before you answer that, can I ask another thing? 

Mr/s Jones:     Go ahead.

Adviser:           Can you afford to retire?

Mr/s Jones:     I think so.  I re-invested a lot in the business, but I’ve also put some money aside.  If I’m still working in the business, a bit, and I hold on to my shares for dividends, I should be OK.

Adviser:           I see. You’ll retire but continue owning the business and working part-time.  Anyway, let us put the question another way. Are you financially secure independent of the business?

Mr/s Jones:     I don’t really know.  I mean, I’ve always had enough to enjoy my lifestyle.

Adviser:           OK, but let’s be realistic. It will be difficult to retire and leave the business if you’re still financially dependent on it for your lifestyle.  If the business is going to partly fund your retirement and pay you back for the blood sweat and tears you’ve invested over the years, then what you need must be balanced with what the business can afford.

Mr/s Jones:     You don’t think I’ll ever retire, do you?

Adviser:           No, I don’t think that.  Like everyone else in your position you’ll retire in your own way, that’s what happens.  But you must ensure that your family is clear about what you mean by “retire”. 

Mr/s Jones:     OK I’m getting the point.

Adviser:           Can we talk about when you’ll transfer ownership?

Mr/s Jones:     Why?

Adviser:           You could say that will be the time when the next generation feel that they have real skin in the game. And it’s another aspect of planning for the future.

Mr/s Jones:     I hadn’t thought about it that way before. As I mentioned I might need to hang on to some shares for financial reasons. Then, of course, as you know 2 of my three children work in the business, and that worries me when it comes to how to divide ownership among them. I mean what is fair to the business and fair to the family?

Adviser:           You know what I’m going to say now?

Mr/s Jones:     I should discuss this with the family.

Adviser:           Good idea. Let me know how you get on and if I can help.