If your retirement depends on your business, it is worth deciding what role you want the business to play before planning a sale. You may be considering selling it, handing it to someone else or continuing to receive income while reducing your involvement. Each option needs to be considered alongside the retirement you want and your wider financial position.
The key question is not simply, “How much could I sell my business for?” It is, “How will this business support the retirement I want?”
Decide what you want retirement to look like
Business owners often spend years building a business around their work, income and responsibilities. That can make it difficult to separate the future of the business from the future they want for themselves.
Before committing to a sale or handover, ask yourself:
- Do I want to stop working, reduce my hours or remain involved in a different role?
- How much income will I need to support the retirement I want?
- What do I need the business to provide, and for how long?
- How much responsibility am I willing to keep?
Your answers may change which option makes sense. A business can keep providing income, but it may also keep demanding your time and attention. If retirement means stepping away, be realistic about whether the arrangement you are considering will let you do that.
Consider what each option involves
Selling the business may provide a lump sum, but the sale price alone does not tell you how long that money needs to last or how it fits with your other retirement assets.
Handing the business to someone else may involve a period of transition. You may need to decide when responsibility passes to them and what support, if any, you will continue to provide.
Keeping the business while reducing your involvement raises a different question: can it continue operating and providing income without relying on you as it does today? The distinction matters if you expect the business to fund retirement but no longer want it to structure your day.
Look at the wider financial picture
It is easy to focus on the business because it is familiar and may be the asset you have spent the most time building. Retirement planning needs a wider view.
Consider the business alongside your superannuation, investments, property, debts and other expected income. This helps you work out what the business needs to provide and whether your retirement plan relies too heavily on one outcome, such as achieving a particular sale price.
A productive advice conversation also depends on being open about your full financial position and what you want your money to achieve. As Stefan explained in the interview, that gives an adviser a better basis for identifying which options may be relevant to you.
Do not leave timing until the sale is ready
The timing of a sale or handover can overlap with wider income and tax planning. The financial year in which a transaction occurs, your expected income and your other assets may all be relevant.
Discuss the proposed timing with your accountant and licensed financial adviser before committing to a date. The aim is to understand how the business decision fits within your retirement plan, rather than treating it as a separate event.
You do not need every answer before seeking advice. But being clear about the retirement you want, what you expect the business to provide and how involved you are willing to remain gives you a useful place to start.
We can help you bring your business, superannuation, investments and retirement goals into the same conversation. Contact us on +61 3 9087 1015 or [email protected].
This article provides general information only and does not take into account your objectives, financial situation or needs. Before making financial decisions, consider whether the information is appropriate for you and seek professional advice.
