Many business owners assume that their business will be their pension. But making that assumption can be dangerous, so I want to share some things for you to consider.
In light of what we have all faced in 2020, I think it’s fair to say none of us can make assumptions in life. And that’s certainly true in business too.
Crucially, if you are relying on the sale of your business to provide your pension you need to reflect on just how stable the business is. No sector is without its risks but there will always be some sectors that are more vulnerable so that needs to be a key consideration.
If you are the main source of delivery and/or sales, there is likely to be very limited investment value for a prospective buyer. At best, a sale would include you remaining part of the business for a period of time – something you may not want.
If you have a partnership or limited company with more than one director, you will need to consider your business partners/fellow directors when making plans to step back from the business. You need to discuss this with them ahead of time, so you can put a strategy in place with confidence. You certainly don’t want any nasty surprises at the eleventh hour.
Your health may force you to slow down either temporarily or permanently, which could have an effect on sales and business performance. That could have a knock effect on the value of the business in the future.
What about your family?
Is there anyone who is interested in your business – even if they don’t work in it right now? One of your loved ones may wish to take over the business. It’s time to have that conversation so you can make plans accordingly – succession plans, possibly re-structuring and an exit strategy.
Whilst you may wish to continue playing a part in the business, your family may not see it the same way – you could be a drain on the bank balance, or they may just want to take the business in their own direction. All of this needs to be discussed and planned for.
We’ve talked about this before, so you know what I’m going to say…
You need to be clear about what you want your life to look like. When you’re really honest about what you would like to see in your retirement diary, you may come to the realisation that you don’t want to give up work completely.
Maybe you would like to do some consultancy? Or you may like the idea of remaining in your business but on the board – as the Chair or CEO. Perhaps you will be the strategic lead but not involved in the day to day. So, you may take a dividend if you remain a shareholder, but not a salary.
Of course, you know from my previous posts that you can’t include your business in your financial projections because it’s outside of your bucket, until you sell. That old adage about not counting your chickens before they hatch…
Ultimately, your business isn’t going to form any part of your pension, until it’s liquid. In other words, when you have sold it and got the money in your hand. Until then it’s just a pipe dream.
And given the lessons learned? I’d recommend you have more than one plan to provide for you in later life.
If you would like to start cementing your LifePlan, why not start with the free Return on Life Assessment? You can read more about that here – Return on Life.