Running a business is so time consuming and in the early days, you probably don’t have much time to think about anything else. That’s why a lot of business owners don’t put enough thought into their retirement.
All of their energy goes into growing the business and making it a success, but what happens when it comes time to leave the business behind? If you are a business owner, you need to start thinking about this sooner rather than later. Unfortunately, a lot of business owners leave it too late to start thinking about retirement and they make some simple mistakes. These are some of the biggest retirement planning mistakes that small business owners need to avoid.
Not Having An Exit Strategy
You need to have an exit strategy in place to decide what happens to the business when you want to retire. Do you have children that you will pass it on to or will you pass it on to one of your trusted employees? If you pass it down, will you sell your interest in the business or stay on as an owner? Would you prefer to sell the business on and leave it behind entirely? You need to decide what your exit plan is going to be because this will have an impact on your retirement plan. Don’t forget to put an early exit plan in place in case you are forced to retire early due to illness, for example.
Overvaluing Your Business
A lot of small business owners don’t have a retirement plan in place because they are planning to sell the business and use that money to fund their retirement. However, that’s a risky strategy because you are putting all of your eggs in one basket. What happens if the business hits hard times and you can’t sell it for that much? If you are planning to sell the business, you need to value it and consider what the value will be by the time you retire. Unfortunately, a lot of business owners over value their business, so they don’t save enough for retirement. The best way to avoid this is to have an independent valuation carried out.
Failing To Make Investments
Counting on the sale of your business isn’t a sensible strategy because you never know what could happen. If you want to secure your finances, you need to start putting some money into investments. Stocks and shares or Forex trading are both great options and if you start building a portfolio now, you should see some healthy returns by the time you retire. This will give you something to fall back on if the value of your business drops significantly.
Not Having Any Alternative Earning Opportunities
If you retire from the business in a bad position and you are unable to cover your living costs, you will be in a bad position. One of the biggest mistakes that people make is failing to come up with a backup plan. This is why it’s important to consider alternative earning opportunities. You could start a career as a freelancer, for example. It’s a great option because you can take on a small amount of work to help you cover your expenses and still enjoy your retirement the rest of the time. If you are a successful business owner, you should also consider offering your services as a consultant. There are plenty of new business owners out there that need the advice of an experienced owner.
It might seem like it’s a long time away but time flies and retirement will be looming before you know it, so start making plans right away.
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