‘I feel the clock ticking’: My wife and I are in our 60s — and employ 48 people in a small town. Can we ever retire?
If you own the business that anchors a small town, retirement is not just a personal decision. It feels like a referendum on your employees’ livelihoods, your customers, and the community’s future. That weight can keep owners working long past when they’re ready. The good news: you can retire responsibly. But it takes a plan, a runway, and choices that balance your financial independence with the legacy you want to leave.
Here’s how to think it through, step by step.
Start with the two numbers that matter
Before you talk about selling or succession, establish your “enough” number and your “now” number.
– Your enough number: the invested assets you need to fund the life you want without the business. Add up essential spending (housing, food, utilities, taxes, insurance, healthcare), discretionary spending (travel, hobbies, gifts), and one-time goals (helping kids, a cottage, a camper). Build in a cushion for big unknowns like long-term care.
– Your now number: what you already have outside the business (retirement accounts, brokerage, cash, real estate equity) plus Social Security and any pensions.
The gap between enough and now is what the business must cover—either by continuing to pay you as absentee owners, by being sold, or by a combination of sale proceeds and ongoing rents (for example, if you keep the building and lease it back).
A simple rule of thumb is that a diversified portfolio can sustainably support roughly 3.5% to 4% of its value each year, before taxes. If you’ll receive $60,000 combined from Social Security at full retirement age and you need $180,000 after tax to live, your portfolio may need to produce around $120,000, implying about $3 million invested. That’s a starting point, not a guarantee—healthcare costs, taxes, market returns, and longevity need real planning—but it frames the decision.
Decide what you want to protect most
Owners in your situation usually have overlapping goals:
– Financial independence for the two of you
– Jobs and continuity for your 48 employees
– A path that keeps your business’s services available locally
– A timetable that respects your energy, health, and family plans
No single exit checks every box perfectly. But several do a good job if you start 18 to 36 months ahead.
Your main options, with pros and cons
1) Keep the business, step back, and professionalize
You remain owners. You hire or elevate a general manager or president, put in systems, and compensate leaders with bonuses and possibly profit-sharing or minority equity.
Pros: You retain control and cash flow, protect jobs, and can transition at your pace. If you own the building, rent becomes a steady retirement income stream.
Cons: You still carry concentration and key-person risk. The business must throw off enough profit after leadership compensation to fund your retirement. You’ll need robust reporting, a board or advisory council, and a succession plan for your new leaders.
Best for: Profitable, stable businesses where the owner isn’t the product. Works well if you like the idea of being chair, not CEO.
2) Sell to your management team (a management buyout)
Your managers purchase the company, often using a mix of bank financing (including SBA loans), a seller note, and their own cash. You can structure yourselves out over time and require covenants about keeping operations and jobs local.
Pros: Keeps culture and jobs intact, and rewards the people who helped you build the business. Timelines and terms are flexible.
Cons: Financing can be tight. You may receive part of the price over time and carry some risk until you’re paid in full. You’ll likely need to mentor the team for a year or two.
Best for: Businesses with a capable second layer of leadership and steady cash flow.
3) Employee ownership (ESOP or employee ownership trust)
An ESOP is a qualified retirement plan that buys the company for the benefit of employees. The company borrows money to purchase your shares; you can sell gradually or all at once. An Employee Ownership Trust (EOT) is a simpler, newer model in the U.S. that can also preserve jobs and culture.
Pros: Strong legacy and retention benefits; potential tax advantages; owners can exit gradually with a fair market valuation. In some structures, the company’s ESOP-owned portion may not pay federal income tax, boosting cash flow for debt service and growth.
Cons: Upfront costs and ongoing administrative complexity are real; you’ll need specialized advisors. The company must be consistently profitable with enough payroll to support the structure.
Best for: 25+ employee companies with steady earnings, a long-term horizon, and a desire to keep jobs local.
4) Sell to a strategic or financial buyer
A competitor, supplier, regional consolidator, or private investor acquires the company. You can negotiate covenants to keep operations in town for a period, and sometimes get the highest price here.
Pros: Typically the largest buyer pool and potentially the highest valuation, especially if the buyer gets synergies.
Cons: Culture and jobs can change. You may be asked to stay for a transition or accept part of the price via an earn-out tied to future performance.
Best for: Companies that are attractive beyond the local market—brand, niche, contracts, or equipment that others value.
5) Partial recapitalization
You sell a minority or majority stake, take some chips off the table, and keep a meaningful ownership position. A private investor or family office provides liquidity and expertise.
Pros: Personal diversification and professional support, while staying involved.
Cons: Shared control and governance; you must align on strategy and time horizon.
Best for: Owners who want to reduce risk now, grow with a partner, and exit fully later.
Don’t forget the building
If you own your facility, consider keeping it and leasing it to the buyer or your management team. A long-term, triple-net lease can create predictable retirement income and anchor jobs in town. A separate sale or a 1031 exchange may also be part of your tax strategy.
How much is the business worth?
On Main Street, many companies are valued on Seller’s Discretionary Earnings (SDE)—your profit plus owner salary, perks, and one-time adjustments—at roughly 2 to 4 times SDE. Larger or more sophisticated companies price at a multiple of EBITDA, often 4 to 6 times for lower-middle-market firms, more for exceptional businesses.
Small-town location can depress multiples because the buyer pool is thinner. But you can lift value in 12 to 24 months by:
– Cleaning up financials: reviewed or audited statements, clear add-backs, and normalized owner compensation
– Reducing owner dependence: document processes, cross-train, and make yourself operationally irrelevant
– Diversifying customers and suppliers; securing assignable contracts
– Strengthening leadership: elevate a #2, define KPIs, implement monthly reporting
– Addressing risks: safety, compliance, environmental, insurance, cyber
– Calibrating working capital needs and avoiding large upcoming capex surprises
– Separating non-core assets and real estate from the operating company
Taxes matter—plan before you sell
Your structure (S-corp, C-corp, LLC), whether you sell assets or stock, and how the purchase price is allocated drive taxes. Asset sales often trigger ordinary income on depreciation recapture before capital gains; stock sales can be more tax-efficient for you but less attractive to buyers. In some cases, “personal goodwill” can lower taxes if much of the value truly resides with you and is documented. ESOP sales by C‑corp owners can qualify for deferral under Section 1042 if requirements are met. Installment sales spread gains over years. None of this is one-size-fits-all—bring in a seasoned CPA and transaction attorney early.
Keep building your outside nest egg while you decide
If you’re still operating for a few more years:
– Max out retirement plans. A 401(k) with profit sharing plus a cash balance plan can allow significant, deductible contributions in your 60s.
– Take reasonable distributions to diversify outside the business.
– Consider key-person insurance on you and any successor, and review liability and umbrella coverage.
Integrate Social Security, Medicare, and long-term care
– Social Security: Delaying up to age 70 increases benefits about 8% per year after full retirement age. Frequently, the higher earner delaying and the lower earner filing at or near full retirement age maximizes household payouts, but run the numbers.
– Medicare: Enroll at 65 unless you’re covered by a qualifying employer plan. Watch income-related premium surcharges (IRMAA); a large sale in one year can spike premiums two years later.
– Long-term care: Decide whether to self-insure, buy traditional or hybrid coverage, or use home equity. This is a key variable in your enough number.
A simple example to test feasibility
Suppose your business generates $1,000,000 of normalized SDE. If a credible market multiple is 3.5x, the enterprise value is $3.5 million. You have $300,000 in net debt, so equity value is $3.2 million. After transaction costs and taxes, say you net $2.4 million invested. You also own the building, which you keep and lease for $96,000 a year, net of expenses. Combined with $60,000 from Social Security, you have about $156,000 annual cash flow, plus a 4% draw from your $2.4 million portfolio ($96,000), totaling $252,000 before taxes. If your target lifestyle needs $180,000 after tax, you’re in range. If your spending target is much higher, you may need a higher sale multiple, a phased exit, or more time to grow value.
A 12–24 month action plan
– Clarify goals: timeline, role after transition, non-negotiables about jobs and location.
– Assemble your team: a fiduciary financial planner, CPA with transaction experience, M&A broker or investment banker (size-dependent), and an attorney who does small-business sales. If exploring employee ownership, add an ESOP/EOT specialist and trustee. Your local Small Business Development Center and state employee ownership center can be helpful.
– Get a valuation and a readiness assessment: identify gaps that depress value or scare lenders.
– Professionalize operations: SOPs, KPIs, leadership development, customer diversification.
– Decide on a path: management buyout, employee ownership, third-party sale, or keep-and-professionalize.
– Prepare the building strategy: separate entity, market-rate lease, maintenance plan.
– Tidy the books: three years of clean financials, minimize discretionary add-backs, align your compensation to market.
– De-risk taxes: map sale structure options, consider installment terms, and model after-tax proceeds.
– Map your personal benefits: Social Security claiming, Medicare timing, IRMAA, and long-term care.
– Test-drive retirement: reduce your days on-site, take a month away, and see what breaks. Fix those systems before a buyer finds them.
– Communicate thoughtfully: when appropriate, talk to key employees about growth and opportunity. Morale and retention are part of enterprise value.
The emotional side
Owners often say, “I’m not tired of the work; I’m tired of the worry.” Retirement can feel like abandoning your people. Reframe it: responsible succession is a final act of stewardship. Whether you choose employee ownership, a management buyout, or a well-vetted acquirer, you’re creating continuity that outlasts you. And if you keep the building or stay on as chair for a season, your presence can anchor the transition.
So, can you ever retire?
Yes—if you treat your business like the major asset it is, give yourself time to prepare, and match the exit to your values and numbers. For many small-town owners, the best path is either a management buyout with bank and seller financing or an employee-ownership structure that gradually buys you out while keeping jobs local. Others will professionalize, step back to a chair role, and enjoy steady cash flow and rent for years before selling. A minority of owners will find a strategic buyer that pays a premium and agrees to keep the operation in town, at least for a period.
Start now. The clock is ticking, but 18 to 36 months of intentional work can be the difference between feeling trapped and walking out the door proud, solvent, and confident the lights will stay on for your 48.
