In this article, we’re going to tackle the topic of planning for retirement with a small business because it’s never too early to start preparing for the future. Here are some of the main ways you can plan your retirement as a small business owner:

1. Consider selling your business

When the reality of retirement hits, one viable option that all business owners will need to consider is if they’re going to sell their business or not, some business owners choose to run their business far beyond the retirement age, but with the risk of ill health or change in the market, one of the safest options you have is selling the business.

Many people depend on being able to sell their business to be able to retire, and there are a few things you need to be aware of if this is the route you choose to go:

It may take a lot of time to sell

Finding a buyer for your business is a lot easier said than done due to a number of factors – most buyers won’t be willing to pay the price you’re hoping for. This means that it can take years to fetch a good price and officially sell the business. So, if you’re banking on selling to retire, you need to allow for enough time to do so. Considering that most buyers want to see at least three years of financial statements, giving yourself three years to find a buyer is a realistic goal.

Always aim to increase the value of your business

Another important thing you need to be aware of is that before you put your business on the market, you need to do your best to increase its value as much as possible. This means keeping the books and equipment up to date, strengthening your online presence to boost sales and even checking your premises regularly to make sure it’s clean and well-maintained. Working closely with a small business accountant will help ensure you keep your books up to date and financials in order.

Ensure you’re covered

As a business owner, you should be well aware that you need to be prepared for the unexpected. This is especially true when you’re selling your business in hopes of retiring. While you’re playing the waiting game, ensure you and your business are covered with the right insurance. This means having the appropriate income protection, Trauma and Business Expenses insurance and Total and Permanent Disability (TPD). Having the right insurance in place means that should anything unfortunate happen, you can prevent debt from accumulating while you’re unable to work.

2. Save for your retirement

Selling your small business isn’t the only way to retire comfortably, but you can also save towards your retirement. When personal superannuation isn’t mandatory for small business owners, there’s a big temptation to put all your earnings into growing the business. While this investment might pay off in the long run, there’s still a huge risk that you’ll pump tons of cash into it and not be able to fetch a good asking price.

Consider building your business and your super investment simultaneously – this way, you’ll be able to mitigate the risk. A self-managed superannuation fund (SMSF) is an attractive option for most business owners as it offers a range of benefits like financial flexibility, lowering your tax rates and broadening your investment horizon. However, an SMSF is not the only option and isn’t ideal for everyone, so before you make a decision, always discuss your strategy with an advisor who can help with investment advice.

3. Succession planning

When you’ve spent so many years building a business, it can be hard to sell it to someone you don’t know. As the owner, you have the option of passing the business on to a trusted employee or family member. While this may seem relatively straightforward, you’ll need to make time to create a successful succession plan to iron out all the finer details. When creating a succession plan you’ll need to consider:

• Who will own the business premises?

• Will you retain any interest in the business?

• Does the successor plan to buy it, and will they have enough money when you need it?

Final Thoughts

On average, Australians live longer than their predecessors, so you can anticipate retiring in decades. Are you financially prepared for this? This is why the topic of retirement is such an important one, and to ensure that you’re ready for it, you need to think about your retirement plans as early as possible. It’s a long-term goal, not a sprint, so build wisely!