How does one address the sensitive subject of life after business? If you believe the old adagefrom Benjamin Franklin that 'the only two things that are certain in life aredeath and taxes', and that avoiding both is somewhat difficult, then we shouldplan for them. Tax planning is somethingyou need to do regularly with your Accountant to ensure your changing personaland business circumstances are being taken into account and this is generallydone well because there is legislation requiring us to pay our way!
The other certaintyin life, death, is less prescribed as it is a little uncertain as to when it isgoing to happen for each of us. What wedo know is that as a business population some 62% (almost two thirds) ofbusiness owners are over 50 years of age and that 23% (almost one quarter) areover 60 years of age. 45% of businessowners aspire to retire in the next 5 years but only 11% have a formalsuccession plan in place (ANZ Privately-Owned Business Barometer Survey).
Given that there areless numbers of Generation X, Y and now Z in comparison with us baby boomers,greater financial demands and with less equity/capital available to them, whois going to takeover these businesses? How are you going to fund yourretirement if you cannot find a buyer for your business? These are questions that each of us need toaddress with some urgency particularly if you are in the 45% who are looking tooffload your businesses in the next five years. If you are in the remaining 55%, then thinking about it would beprudent, because you may need to help the next generation to be financiallyindependent earlier and assist them into the business. Yes we are living longer but that also meansour nest egg has to be larger to ensure that we can enjoy the fruits of ourlabour.
Preparing yourbusiness for sale or transfer takes time. How are you going to address the problem can be illustrated by learningabout the Bathtub test:
During a visit to the secure psychiatric unit, a noted agingbusinessman, who was looking to bequeath some of his money to this facilityasked the Director how he determined whether or not a patient should beinstitutionalized. "Well," said the Director, "we fill up abathtub, then we offer a teaspoon, a teacup and a bucket to the patient and askhim or her to empty the bathtub." "Oh, I understand," thebusinessman said "A normal person would use the bucket because it's biggerthan the spoon or the teacup." "No." said the Director, "A normal person would pull theplug. Do you want a bed near thewindow?"
The moral of thisstory: Sometime the answer to theproblem is simpler than you think. Bygiving yourself time to examine all the options it gives you more choices andensures you arrive at a better outcome. Please think about your future in this way.
We can help withyour Succession Plan. Come along to theChamber SA5 on 22 October 2014 to learn more or contact any of the Team here ataccounted4 if you wish to discuss your future – it’s worth it. All the best in your Business,