You wouldn’t be the first business owner to believe that running a business somehow negates your need for personal financial planning; and that the growing equity in your business equity is the only superannuation plan you need.
You think that because you own a business, your retirement is completely taken care of. You assume that your business will provide everything. There is nothing more for you to do! On all counts, nothing could be further from the truth.
Running a business is no more than a choice you make in how you earn your income. Some choose business income; some choose employer income. Either way, those who take a deeper interest in planning their personal and family financial wellbeing will prosper in the long term.
Furthermore, as a business owner there is an extra layer of planning you should be thinking about. That is, planning the future of your income-earning and capital-appreciating asset, and protecting the equity in business that you work so hard to build up.
There is no guarantee that your business equity will translate into the retirement lump sum you hope for. There are just a few of the things that could go wrong and derail your dream:
- Adverse circumstances (e.g. litigation, legislative change, customer desertion, obsolescence) force you to sell at a bad time
- Your health fails you before you reach your ideal ‘sell out & retire’ scenario
- Your business partner dies prematurely and his / her spouse becomes your new unwelcome business partner
- You want your children to inherit your business but they are not interested
- You don’t structure your business correctly to take advantage of the small business rollover rules
- You don’t have a Will to control the bequeathing of your personal assets or your business ownership and / or control
- You have no emergency fund and no liquidity available should something major go wrong
Personal planning and business planning aren’t just esoteric concepts. They are processes that help you predict, protect, or take advantage of the expected and unexpected things that life throws up.