As a business owner, it is important that you make plans for your future retirement. Many business owners are great at building businesses but are not so great about handing them on. The process is not unlike guiding a business through a recession and making it ready for the upturn: careful planning is the key to success.
For any employee who is preparing for their future retirement, they can pay into an occupation pension scheme through their employer. But for a self-employed person who has full control over their financial affairs, it is even more important that they factor into their finances putting money aside for their retirement.
It is too easy to get caught up in the day-to-day running of the business and put retirement plans on the backburner. Thinking long-term for the future is vital, and for a business owner to retire comfortably, there are a few measures they must take in advance to prepare.
To have a comfortable retirement, you must have accomplished the most important aspect of it; finances. Financial planning is essential and is the most important part, but some business owners don’t feel adequately prepared for this. As a business owner, sorting out your own pension is your responsibility. Decide when you want to retire and then calculate how much money you will need to put aside each month into a high-interest savings account or a private pension scheme – think about how much you could realistically contribute.
Start planning early
Once you enter the world of full-time work, you should start saving for your retirement, and business owners are no exception. The sooner you start, the more prepared you will be and the more likely you will be to retire early.
Create a retirement plan
Consider an exit, succession and transfer strategy. What will you do with the business once you retire? Will you hand it down to another family member or a friend, or will you sell the business? You need to have some sort of a plan in place for your business for when you retire. Include personal goals – such as moving abroad, travelling the world or purchasing a holiday home – into your retirement plan, and prepare your finances for those personal goals. Some business owners start the planning process 15 years before they intend stepping down.
Set goals for yourself and work towards them
You need to be able to set long-term goals for your business. Think about how you will grow the business to increase its value. You need to be able to set financial goals for yourself to make sure you save up enough for a comfortable retirement.
Communicate your plans
You should also consider whether it's best to phase in your departure. You might gradually transfer some key responsibilities to your successor, or possibly reduce the days you work in the business.
It is vital to communicate the succession plan to members of the family involved in the business, and other management. This will help prevent misunderstandings and future conflict.
For an informal chat to discuss planning for your retirement, contact Dawn.