Retirement – a word that elicits images of leisurely days and freedom from work. But if you’re a business owner, your path to that relaxing sunset may be more complex than others. While others are wondering which hobby to pick up, you’re wrestling with some big questions: How will I fund my golden years? What happens to my business after I retire?
March 1, 2024
Retirement – a word that elicits images of leisurely days and freedom from work. But if you’re a business owner, your path to that relaxing sunset may be more complex than others. While others are wondering which hobby to pick up, you’re wrestling with some big questions: How will I fund my golden years? What happens to my business after I retire?
Retirement should be considered carefully and planned for strategically, so you can make the most of life’s care-free years.
For SME owners, retirement planning is not just a matter of personal finance but also involves the future of your business. While employees often rely on established pension plans, as a business owner, you must create your own financial safety net. This involves assessing the value of your business, exploring various retirement funding options, and understanding the tax implications of your choices.
Your retirement plan should serve two purposes: securing your personal financial future and ensuring the continuity or appropriate disposition of your business.
A self-managed super fund (SMSF) offers small business owners the flexibility to control their investment in a wide range of assets, such as real estate (which could include their business premises) and shares. It also comes with tax benefits, including concessional tax rates on its income, and salary sacrificing some of your pre-tax income to maximise your contributions while reducing your personal taxable income.
And the main benefit of any superannuation fund is the tax-free pension opportunity for members over 60 years old.
Don’t wait until you’re ready to retire to develop a business succession plan. If your business has a continuing value beyond what is provided by your personal efforts (such as manufacturing, agriculture, retail or professional services), you may want to consider handing over the reins to the next generation in your family or selling to new owners. In the latter case, you’ll need a way to identify potential buyers, either by advertising or via your industry connections or employees.
Your exit plan should also include:
The sales value you can achieve for your business may have a major impact on your retirement income. With that in mind, it’s a good strategy to aim for an uptick in business profitability in the years preceding your retirement. Selling your business while it’s performing at its best will help you to secure a higher price.
Your profit maximisation strategy could include introducing new products or services, expansion into a wider market, or streamlining processes and reducing expenses. These efforts will help to make your business more attractive to potential buyers.
As a business owner, your path to retirement needs an approach that considers personal financial security alongside the continuity of your business. While the process can seem daunting, enlisting the expertise of a financial advisor or retirement planning specialist is a wise and beneficial step. They can help align your retirement plan with both your personal aspirations and business objectives and securing a financially stable and fulfilling retirement.
This information is for general information purposes only. The information contained herein does not constitute financial or professional advice or a recommendation. It has not been prepared with reference to your financial circumstances or business and should not be relied on as such. You should seek your own independent financial, legal and taxation advice as to whether or not this information is appropriate for you.
For personalised service, the very best financial products and exceptional customer service where you really matter, look no further than the professional team at Mainland Finance
Contact Us