There are plenty of ways to set a revenue goal for your business. You might…
As a business owner it’s easy to think you’ll work forever and who knows maybe you will. But what if you don’t? If you decide you don’t want to work anymore, or worse, you physically can’t work any more how will you financially pay for your retirement? Because I need you to understand something – your retirement won’t fund itself and neither will your business without a clear strategy. I speak to so many business owners who have no financial plan for their retirement and it breaks my soul, which is why I’ve written this blog post. Because when you have a clear strategy your business can fund your retirement and ensure you live as nice a life in retirement (or even better) than you did whilst working. So keep on reading to find out how your business, with a clear strategy, can fund your retirement.
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YOUR RETIREMENT WON’T FUND ITSELF AND NEITHER WILL YOUR BUSINESS WITHOUT A CLEAR STRATEGY
Before discussing the different strategies you can use so your business is essentially supporting you financially for retirement, I want to make one thing clear – you’ve got options. There is no one universally right way to financially prepare for retirement. There are many retired people who are VERY happy with the life they are living in retirement that have financed it in many different ways. Below isn’t an exhaustive list of the only ways you can prepare. Instead, I’m sharing some of the ways you can use your business to financially support your retirement.
You might decide to choose one strategy, you might go for a combination, you might take a completely different route. Honestly, I don’t care as long as reading this blog post makes you think about what you can do and help you to make a decision about what you will do and start taking action.
That being said here are some of the strategies to financing your retirement if you have a business.
Strategy 1: Build a business you can eventually sell
One way to use your business to support your retirement is to build your business with the intention of selling your business (or exiting). Depending on the type of business and how successful your business is, it is very achievable to sell your business for a sum that will mean you have a comfortable retirement.
However, if you are building your business to sell you have to have that in mind sooner rather than later, as it impacts how you build your business. It will mean ensuring your business has a good level of profitability, and ideally you’d want to look at ways for your business to generate recurring or predictable income. You’ll want to reduce founder dependency. This can often mean not having the founder as the face of the business and having a strong team that would mean the business could continue to successfully run without the founder. Good documentation of systems and processes are key. Building intellectual property that the business owns can help with valuation too.
There are some people who start a business with the plan to exit all along. However, even if you have been building your business and now you think that’s the route to go, it doesn’t mean it is too late. For example, in recent years I’ve seen multiple business owners with a business that is built upon their personal brand decide to split their company in two. The purpose behind splitting the business is so that one of the companies can be sold and the necessary changes are made to ensure that business is a good proposition for buyers, whilst the business owner is still able to use the other business to continue with some parts of the original business. For example, someone who speaks, offers a one-to-one service, and has a successful membership, course or programme will split their business so that they can sell off the membership, course or programme, whilst still being able to speak and offer one-to-one services.
Strategy 2: Build a business that can operate with minimal involvement from you
Another strategy when considering how to use your business to support your retirement is to build a business that can operate with minimal involvement from you. The less you can be involved in the business, the longer the business can run without you having to go into proper retirement mode and shut the company down. By designing your business in the right way and having the right team around you, it could be that you can virtually step away from the day-to-day running of the business, but the business can still continue to run successfully and therefore provide you with an ongoing income stream in your retirement.
Strategy 3: Build a business that pays you enough now to personally invest for your retirement
As a service-based business owner, it might be that building a business to sell or building a business you can step back from isn’t realistic or what you want. Luckily, you still have options. If you know that ultimately there will come a point where you retire and so you no longer have a regular income or get a big pay out then you can decide to focus on building the business so that it is personally paying you enough to invest for retirement.
You might decide to invest in a pension, property or something else. But with this strategy the focus is on the business being able to pay you more than “enough” right now. You want to be in a position where the business is paying you an amount that enables you to live your desired lifestyle now, and you have additional income that you can be using to invest for your retirement.
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Strategy 4: Invest for retirement directly from the business
Whether you can use this approach or not will depend on where your business is based and how it is structured. But for some business owners, there is the option where a business can directly invest for the business owner’s retirement. For example, in the UK, a limited company can make pension contributions into a director’s pension. As already mentioned this blog post is just for information purposes. To find out whether this is something that is possible, and worthwhile for you, you should seek professional financial advice.
Choosing the right strategy so your business can fund your retirement
As you can see, there is more than one way for your business to be able to fund your retirement. But the strategy you choose will impact how you build the business and what the priorities are.
It might be that going through those options, one strategy straight away felt like the right option for you or it might be that you are still trying to figure out what is best. It might be that you like the idea of one strategy but based on how your business is operating right now it feels impossible. This is why I say it’s important sooner rather than later to work out the strategy for how your business will fund your retirement. You might have years or even decades before you want to retire. That means you’ve got time to make changes. As I shared earlier I have seen business owners who had a founder-led brand that would be unsellable. But because they decided they wanted to be able to sell they looked at how they could divide their company and have one be sellable. This isn’t something that happens overnight. But it can be done with some time. Hence me encouraging you to think about this sooner rather than later.
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Decide how your business will fund your retirement sooner rather than later
Retirement can feel a long way off. Even though you’ve taken the time today to read this blog post I know how easy it is to decide it’s important and something you’ll come back to when you’ve got more time and then months or even years roll by. The sooner you make a decision the better. Sometimes making the decision means you can act straight away and get the ball moving. For example, if you decide you are going to personally invest for your retirement, then you might decide to start investing from this month (even if they are smaller than you’d like right now). But in some cases, it might be that deciding on the strategy (like building to exit), means bit by bit over the coming years you make changes to your business so that when the time is right your business is positioned for the sale.
Either way the more time you give yourself the better. So decide right now what is the next thing you are going to do and block out the time in your diary. Don’t let it be another item on your to-do list that you don’t get round to.
That’s it. You now know that your retirement won’t fund itself and neither will your business without a clear strategy.
Working out how your business isn’t going to fund your retirement is vital. You don’t want to build your business to the point where you are living a nice life now, but when you get to retirement, you don’t have enough money. To avoid that from happening, you need to decide what your strategy is going to be. As discussed you aren’t limited to just one strategy and that means you should be able to find a strategy that will work for you and the business.
I hope you’ve found this blog post useful. If you have do let me know over on Instagram or LinkedIn.
If you are currently at a point where you are serious about growing your business over the next 6-12 months, then I would love to support you.
I offer 1:1 mentoring where I help service providers to strategically choose their route to growth, and then provide them with the strategy, support and accountability to get there.
For more information about my 1:1 mentoring, click here.
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