If you are a business owner not planning to sell up in the next five years and you wish to avoid future unpleasant financial surprises, especially when the time comes to retire from your business, then this article is for you.
If however, you are one of many business owners who are planning to retire solely on the proceeds of the sale of your businesses during the next 5 years or so, you may already be too late to avoid an unpleasant surprise, but you may still be able to mitigate the extent of the unpleasantness, so I have also included a few suggestions in this article for achieving this outcome.
The unpleasant surprise referred to above, which has its roots in the large bulge of baby boomer business owners all planning to exit their businesses around the same time and the likelihood of far fewer prospective purchasers being in the market at that time, will most likely take the form of significantly lower selling prices, usually well below expectations, being achieved for the sale of these businesses.
A more extreme, unpleasant surprise which is likely to be experienced by sellers for many of the last century style of businesses still owned by many baby boomers, will be little or no demand at all, from potential buyers for these businesses.
For baby boomer business owners, your key challenges in the period between now and your planned retirement date will be to; reinvent or revitalise your business, systemise it so that it can operate independently of your direct involvement, enhance its saleability by any other means available to you including quickly increasing profitability, introduce succession planning or plan for an internal buyout at a specific future date, and perhaps to consider introducing new shareholders now, rather than at the time you choose to retire.
For all business owners of later generations, the situation unfolding now for many of the baby boomer business owners is one you should seek to avoid, at all costs.
You definitely need to utilise your business to provide the substantial nest egg that you will need to have in order to afford a comfortable retirement, but this should be achieved by ensuring that you are always an employee of your own business, and that the business makes regular contributions of an adequate amount on your behalf, to the employee superannuation fund run by the business on behalf of its employees.
To achieve this outcome, you need to ensure that the prime objective of your businesses today is to operate profitably at all times, and at a level which allows the owners to draw a living wage, and make adequate superannuation contributions on a weekly, fortnightly, or monthly basis for as long as the business operates.
If this can be achieved, any risk of the business not being able to be sold at the time it needs to be sold, or selling for a price far less than the amount needed for retirement, is completely mitigated. The bonus of course being that, if the business is able to be sold when desired, all proceeds are simply icing on the cake, and the price obtained is immaterial.
The difficulty in reaching this outcome is that few SME business owners have the achievement of a minimum level of profit as their prime and ongoing business objective.
It may sound easy enough, but it takes both foresight and discipline, as well as dogged determination on behalf of the business owner to implement, enforce and continually reinforce everything required to keep all endeavours of the business focuses on achieving the level of profit which allows the consistent payment of wages to the owners, and the making of the required level of superannuation contributions on a regular basis.
Is your business paying you a wage and making regular contributions to a superannuation fund on your behalf?
Is the making of a required minimum level of profit the prime business objective of your business?
Is your business culture capable of being reshaped to allow such an objective to be successfully implemented?
If however, you are one of many business owners who are planning to retire solely on the proceeds of the sale of your businesses during the next 5 years or so, you may already be too late to avoid an unpleasant surprise, but you may still be able to mitigate the extent of the unpleasantness, so I have also included a few suggestions in this article for achieving this outcome.
The unpleasant surprise referred to above, which has its roots in the large bulge of baby boomer business owners all planning to exit their businesses around the same time and the likelihood of far fewer prospective purchasers being in the market at that time, will most likely take the form of significantly lower selling prices, usually well below expectations, being achieved for the sale of these businesses.
A more extreme, unpleasant surprise which is likely to be experienced by sellers for many of the last century style of businesses still owned by many baby boomers, will be little or no demand at all, from potential buyers for these businesses.
For baby boomer business owners, your key challenges in the period between now and your planned retirement date will be to; reinvent or revitalise your business, systemise it so that it can operate independently of your direct involvement, enhance its saleability by any other means available to you including quickly increasing profitability, introduce succession planning or plan for an internal buyout at a specific future date, and perhaps to consider introducing new shareholders now, rather than at the time you choose to retire.
For all business owners of later generations, the situation unfolding now for many of the baby boomer business owners is one you should seek to avoid, at all costs.
You definitely need to utilise your business to provide the substantial nest egg that you will need to have in order to afford a comfortable retirement, but this should be achieved by ensuring that you are always an employee of your own business, and that the business makes regular contributions of an adequate amount on your behalf, to the employee superannuation fund run by the business on behalf of its employees.
To achieve this outcome, you need to ensure that the prime objective of your businesses today is to operate profitably at all times, and at a level which allows the owners to draw a living wage, and make adequate superannuation contributions on a weekly, fortnightly, or monthly basis for as long as the business operates.
If this can be achieved, any risk of the business not being able to be sold at the time it needs to be sold, or selling for a price far less than the amount needed for retirement, is completely mitigated. The bonus of course being that, if the business is able to be sold when desired, all proceeds are simply icing on the cake, and the price obtained is immaterial.
The difficulty in reaching this outcome is that few SME business owners have the achievement of a minimum level of profit as their prime and ongoing business objective.
It may sound easy enough, but it takes both foresight and discipline, as well as dogged determination on behalf of the business owner to implement, enforce and continually reinforce everything required to keep all endeavours of the business focuses on achieving the level of profit which allows the consistent payment of wages to the owners, and the making of the required level of superannuation contributions on a regular basis.
Is your business paying you a wage and making regular contributions to a superannuation fund on your behalf?
Is the making of a required minimum level of profit the prime business objective of your business?
Is your business culture capable of being reshaped to allow such an objective to be successfully implemented?
1 comment:
Dan: I think about this all the time since my mantra which I learned from motivational speaker Denis Waitely, "Chase your passion, not your pension, the money will follow." Candidly, I am still waiting to get the last part of my equation together.
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