So, are you thinking about retirement?
Business advice, tax strategies and financial planning are all key components for working towards a comfortable retirement.
When you’re a small business owner it is completely normal that large chunks of your working life will be focused on the business itself – getting it up and running, ensuring cash flow and profitability, taking advantage of market changes and growth opportunities, looking after staff, customers and suppliers.
In other words, you get busy taking care of business.
But what about retirement?
“Most people go into business themselves because they have a drive, a passion. They like the idea of flexibility and the sense of control that comes with steering their own ship as opposed to working for someone else,” says Paul Rattray of ATB Partners.
“And, most small business owners then imagine that one day in the future they’ll sell their business and have enough money to retire on. But in fact, it rarely works out that way.
“Maybe the kids want to come into the business and keep it running. Maybe the value of the business is solid, but not quite enough to fund a comfortable retirement. In some cases too, businesses fail, and then business owners end up in extensive debt … and can’t go travelling, playing golf, or taking off on the open road in a beautiful classic car like they had originally planned to,” he explains.
The upshot is that many business owners do the right thing by taking time and getting advice for setting up and getting established, but then they don’t take the time to consider what happens if they want to leave the business.
The three types of advisors you will always need.
Paul says that if you want to keep your retirement dreams in tact, you need to engage three types of specialist advisors throughout the life of your business.
Firstly, a business advisor – who will help you with important business planning to ensure your business not just survives, but thrives, at all the pivotal turning points it faces.
Secondly, an accountant. Someone to help you to plan advantageous tax strategies.
“Whether we’re self-employed, employees or business owners we all have to pay taxes,” says Paul. “Taxes are a fact of life, but a reputable accountant will help you to understand and minimise your liabilities where possible within the parameters of the ATO guidelines. And accountant will ensure you meet your tax obligations under the law.”
But tax planning and filing your tax return are only one aspect of your overall finances.
“This is where a financial planner comes in,” explains Paul. “A lot of people don’t understand the difference between a financial planner and an accountant. Basically, an accountant works with your numbers (usually in hindsight at the end of the financial year) and a financial planner works forward – towards your future.
“Think of it this way: An accountant helps you to account for your money and keeps you accountable. A financial planner helps you plan.”
A financial planner will often take a much broader view of your finances – assisting you with debt management, investments, and superannuation amongst other things, so that you can retire comfortably. A planner will also talk to you about life goals, and help you devise strategies for reaching them.
All three skills sets can overlap to a degree, but each professional brings something different to the table in terms of your financial position. They’re all important players on your team.
What’s your exit strategy?
“Once your business is up and running and stable, you should consider exit strategies,” says Paul Rattray.
“Without a crystal ball, you never know what will happen. And when you’re a small business owner your personal life and your business life are inextricably linked – any unforeseeable event has the potential to impact both negatively or positively. So it’s important to be considering ‘what if?…’ and to be thinking about the future.”
The sole goal of any business owner is to grow the business and make money, while creating personal freedom.
But the business environment is complicated, and it is imperative to have professional advice across these three areas so that you can plan ahead, and be proactive rather than reactive, as often as possible.
“Getting too focused on the business finances and forgetting your own personal finances is also a mistake that many small business owners make,” says Paul.
“It’s important, where possible, to keep these separate so that if anything adverse happens to the business, and therefore your income stream, your personal assets and investments protected, especially those you will need for retirement.”
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