Many business owners think that they will never retire – after all, retirement planning for business owners does not always look the same for everyone. You might wish to reduce your hours, or move to semi-retire instead. The decision to retire, or to continue working, might be your choice – but it is nevertheless a good idea to get your business prepared for the change.
You have worked hard to build your business, and you deserve a return for that hard work. If you intend to sell your business, it will need to be appealing to prospective buyers. If you wish for other members of your family to continue on with the business, it must be an appealing prospect to both them and for the bank. A planned exit program can make all of the difference.
How Soon Do You Want to Retire?
Consider the steps below, and make a plan for when you would like to achieve them. Remember that a smooth transition will likely require your involvement for some months after handover.
- Make Yourself Unnecessary
A business that runs without you will be valued considerably higher than one that needs you present. In fact, a business that cannot operate without you can have a Goodwill Value of zero!
Think about all of the things that you do in your business, and then list these down. For each item on the list, identify another person who can undertake that task. Create checklists and procedures to ensure that each task can be completed to the required standard. Make sure that all of the documentation is available to your team where and when they complete their tasks.
This documentation will take some time to prepare, but it will be of great benefit to have it completed early. As you proceed with the other steps of your retirement plan, you may wish to revise and update your task and procedures list as new needs arise.
- Get Your Accounting Records Organised
Your business cannot be valued unless it can be measured. To do that, you need a good accounting system like Xero. You also need an expert Bookkeeper and Accountant to ensure the accuracy of your business records. Accurate and timely accounting records can also help identify problem areas that might hinder your business valuation.
- Work Out How to Increase the Value of Your Business
Look for alternative suppliers, review your staff levels, and check your product and service pricing. Consider adding new services that are good for your customers and good for you. Review the effectiveness of your marketing and, if it is not working, look for a new marketing consultant. You can often obtain a higher valuation if you can increase your profit for two years prior to your exit.
- Get Advice From Your Accountant About Capital Gains Tax
Capital Gains Tax (CGT) exemptions may be available, but you must take the correct steps to be eligible for them. Even when transferring your business to your family, the Australian Taxation Office (ATO) will value the transfer at market value. This can incur significant CGT if not addressed correctly. See your accountant and ensure that you have a good plan in place.
Enjoy Freedom!
Why not plan your business retirement to ensure you get the return you deserve? It’s never too early to design your retirement plan. A good accountant will help you set your business on a winning path right from the start. Book a meeting with us.
The information in this article is general in nature and might not be right for your circumstances. Please arrange a meeting with one of our Accountants to discuss your particular needs. Accountants 2 Business Ph (07) 3823 2344
