How to overcome this small business owner challenge

When speaking to small business owners, one challenge is often raised, something along the lines of: “At some point I need to be able to remove myself from my business but I don’t know if I will be able to afford to”.

The beauty and joy of running your own business can also be the monkey on your back.

You need to maintain daily involvement to keep growing it so that you can make sufficient profits but this also prevents you from looking up and seeing where you are headed.

As a result the day will come when you can’t or don’t want to carry on but because you haven’t been able think beyond the short term you can’t afford to stop.

As a result you will continue to be a slave to the business which is the exact opposite reason you started up on your own in the first place.

You may have an outline plan (hope?) that you will sell the business in the future and use the proceeds to provide your “pension” in retirement.

I have written before about what financial independence is, relying on the future sale of the business does not make you financial independent.

You are at the mercy of the macro and micro economy and the perceived value of your business at the time you wish to sell it; if it is valued at a lower price than you anticipated, or worse still, it isn’t worth a penny you are facing a very tough retirement.

Bad enough if it is just you but harder still if you have family who were relying on you to provide a particular standard of living in retirement.

How will you feel if you can’t manage to keep working but can’t afford to stop? What impact will this have on your health, well being and relationships?

The good news is that you don’t have to get to that Doomsday scenario.

You will have made and reviewed plans for how you are going to grow the business and, in much the same way, you can do the same for your financial future so that you can determine what you need to do to become financially independent and to be able to live the lifestyle you wish to.

By starting with the end in mind and deciding when you wish to stop working and what lifestyle you wish to enjoy you can work back and calculate how much you need to accumulate to support that lifestyle.

Armed with this information you can then work out what actions you need to take to accumulate this wealth.

As a small business owner you have the ability to control your income which will be advantageous once you know how much you need to save because you will know how much profit you keep in the business and how much you extract in a tax efficient manner.

This will be a balancing act depending upon your plans to grow the business but the more you are able to extract the more you de-risk your retirement. If you are able to sell the business in the future any capital you receive will then be a bonus.

At Informed Choice we work with small business owners to help them understand what they need to do in order to provide financial security and to ensure they can maintain their desired lifestyle when they wish to retire.

If you would like to know more about how we do this please do get in touch.

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