Time and again the answer to that question relates directly to a ‘pain point’ exercising the minds of most business owners – retirement planning. Experience shows us for all that retirement planning is thought about, those thoughts are not followed-up with appropriate actions.
What does retirement planning have to do with how much your business is worth? The reality for most business owners is everything! The likelihood for many is that their retirement plans all hinge on the value of their business.
Take, for example, a client that has recently come to me. His previous accountant had not addressed this issue and the client has unexpectedly had to sell the business due to a medical condition. There were grand plans made that, once the business was sold he’d do some travelling and enjoy a couple of expensive pastimes.
This client had invested everything into the business, neglecting superannuation as a retirement source of income after exiting from the business. The business was his life over 30 years. Owners can form a highly emotional attachment to their business. In many cases starting and growing a business has occupied a major part of their working life and this reality distorted the value of his business in my client’s mind.
When he came to me to see what the business was worth, I could only deliver disappointing news. He realised his plans for retirement had gone out the window. In his circumstance we did not have the time to do anything that could increase the value of the business to help him achieve his dreams due to his current medical condition.
As a business owner it is imperative that you have a plan, for not only your business but also your personal goals. As highlighted in a previous article “if you fail to plan you are planning to fail”. Part of the process is determining what your goals are and what you need to do to achieve these goals.
Detailed, specific retirement planning shouldn’t be left until the time you plan to retire. Ideally it should begin at least five years before, allowing time to prepare the business for sale. Planning is geared towards extracting the highest possible value for the business, enabling the owner to adequately fund their retirement needs.
If you are a business owner, or know of a business owner, that is about five years from retiring or selling and would like an idea of what your business is worth, please email me – Mark Calleja – at firstname.lastname@example.org or call me on (02) 9923-2959 and together we’ll plan your strategy to a successful exit.