I cannot tell you how many entrepreneurs I have met over the years who don’t plan for their financial future. The conversation usually revolves around the fact that they have reinvested all their profits into their business baby to make it grow, expand and (hopefully) make a bigger profit.
Contributing to their own personal superannuation is not even on their radar let alone investing for true wealth. Although I am not a financial planner, it’s obvious the compounding effect of NOT contributing to one’s super would have over 5, 10, 15 years. It would be astronomical.

According to Deloitte, the average balances for men and women aged 60-64 are $338,700 and $261,000, respectively. This indicates a significant shortfall in retirement savings, particularly for single women who may find themselves with only enough funds to cover a few years of retirement or subsist on a meagre income.
The Association of Superannuation Funds of Australia (ASFA) suggests that a comfortable retirement for a couple requires around $72,000 per year, or $51,000 for a single person.

Now that you know this statistic, I encourage you to go and look up your current super balance for reflection if not anything else.

I was listening to a business broker just recently who was trying to really emphasis that your business is not your super fund and I found myself nodding in agreement at her presentation. In a nutshell, if you are relying on the ability to sell your business upon retirement and to use the proceeds to fund your retirement you are running a very dangerous gauntlet.

Statistically speaking, your business is highly unlikely to sell for the amount you think it’s worth. Your perception of its value is tainted by a) how many thousands of hours you have poured into it and b) your emotional connection to it.

Here are my top points that businesses owners forget when dreaming about selling in retirement.

1. Business Uncertainty: Your industry will face fluctuations in market conditions, competition, and consumer preferences. There could be economic downturns, technological advancements, or changes in regulations can significantly impact business profitability at the time you wish to sell it (and that you really can’t predict). If you don’t consistently stay as a leader in your industry, it’s VERY easy to fall behind and therefore lower the value of your business.
2. Lack of Diversification: Diversification is key to reducing risk in any investment portfolio. By putting all your retirement financial future into one business, you're effectively putting all your eggs in one basket. If the business fails or under performs, you could lose a substantial portion, if not all, of your retirement savings.
3. Illiquidity: Selling a business to fund retirement can be challenging, especially if there's no readily available market for it. It might take time to find a suitable buyer, negotiate terms, and complete the sale. Illiquid assets can complicate retirement planning and limit your ability to access funds when needed.
4. Dependency on Personal Involvement: Many small businesses rely heavily on the owner’s active involvement in day-to-day operations for the success of the business. Potential buyers can see this as a huge risk on the continual success should ownership change hands and as such the business is priced far lower than the personal success the original owner has.

Ultimately your business should be treated as one component of your overall retirement plan rather than the sole source of future income.

If you are unsure of where you are financially for your future, I encourage you to see professional advice. Even if you are 30 years old and think you have at least 35 years before you need to worry about it – taking steps now will make your life a whole lot easier down the road.

If you need to play financial catch up – feel free to reach out for a complimentary chat at christine.williams@smarterpropertyinvesting.com.au I’d be glad to give you some tips 😊

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