Retirement planning for business owners

Posted on May 5, 2018

So, your business is your pension. But are you sure it will fund the retirement you want?

A report last year by the Forum of Private Business and Clifton Asset Management found that 59% of small business owners plan to sell their business to fund their retirement. And that is the extent of their retirement planning.

If you’re a business owner, you don’t need us to tell you about the many demands on your finances, both now and in the future, and both professionally and personally.

Somehow, you’re expected to juggle the financial needs of your business, with school fees, providing care for elderly parents and keeping up with the increasing costs of every day living. In amongst that, you’re trying to pay off your mortgage.

There’s just not enough left at the end of the month to start funding a new pension now.

But is selling your business really the only option?

Selling your business is not necessarily the best option or the only option. And without detailed planning, simply relying on the sale of your business to provide all your future requirements, certainly won’t provide you with any measure of certainty or any idea of what sort of standard of living you’ll be able to enjoy.

But what alternative is there?

Bringing some clarity to your exit plan

The good news is, that in our experience, with some careful financial planning it is normally possible, to either:

thereby giving you clarity, peace of mind and often greater financial freedom.

Start at the end goal and work backwards

In order to achieve the above, at Juno Wealth we start with the end goal.

That means we explore your vision of the future. When do you want to retire? What do you want to do and achieve in retirement? What standard of living do you want to enjoy?

However impossible or distant retirement may seem at the moment, getting clear on what you actually want from it, is really important.

This is part of our Life Planning work and it’s an in depth, exploratory process. During this process we’ll discuss issues such as leaving a legacy (and what form that might take) and helping family members, inheritance tax planning, as well as some of the finer detail, like what sort of holidays you want to enjoy and how often you want to update your car.

What’s your number?

This planning process helps us identify your long-term goals and objectives (financial and personal) and without identifying these, you cannot begin to create a road map to achieving them. As the old saying goes, if you don’t know where you’re going, how will you know how to get there or when you’ve arrived. It’s that simple.

Creating your financial road map

Armed with details of your desired destination, we can then start planning how to get there.

This part of the process of course starts with an accurate assessment of your current financial position. You may have a pension (or two) from previous employment, old investments or other assets that you’ve not paid much attention to and it’s worth getting clear on what they’re worth, how they’re structured and any tax implications or reliefs.

This provides a nice, clear picture of where you are now as compared to where you want or need to be financially in order to reach your retirement goals.

Identifying easy wins or holes that need plugging

This part of the process also often shows up areas where easy improvements and wins can be made.

Some older pensions actually lose money year on year and family investments may be providing a very poor rate of return or be far too high risk for your current situation. There may be tax and inheritance planning which you can do now, to mitigate future liabilities without effecting your business operations or your disposable income.

With a little help and advice, it can be remarkably easy to make some instant improvements.

Cash flow planning

Once we know your current financial situation, using state of the art software we can start predicting what that means for the future. What standard of living will your current assets provide you with in 10, 15, 20 and 30 years’ time? What about if you suffered a period of ill health or worse still, died unexpectedly? What situation would your partner be left in? What if you spent a large lump sum on the grand kids’ school fees or bought a holiday home?

The software we have enables us to drill down to the detail. That in turn means we have a clear idea of whether your current finances will meet your retirement goals. We can work from the estimated value of your business now and or what you hope to sell it for.

The final piece of the financial puzzle

It is only when we have all the other pieces of the puzzle in place, that we create an effective financial plan. If you’re on track already with your assets, that’s great but we may be able to highlight areas where you can improve your financial stability and increase your wealth. Or we may just be able to reassure you that you can afford to reinvest in your business or spend money elsewhere, without adversely effecting your future.

Back to your exit strategy

With a clear financial plan, you can start to plan your exit in more detail. If you know you need to sell your business for £X, you can start planning how and when to do so and what needs to be done. If you know that you are going to need to sell it for more than you originally thought, you can start working on how to achieve that.

But you may also find, that there our options available. We can discuss different methods of funding your business and or retirement, reinvesting assets in a way that’s more likely to achieve the results you need and/or insurance options.  All of which brings increased clarity, confidence and peace of mind, when it comes to finances both now, and in the future.

We can’t of course promise you that you’ll sell your business for what you want, when you want to. But we can give you the tools that you need to make it much more likely and provide you with the information to plan your future with confidence.

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