It’s really common for business owners to believe that selling their business is going to be, or should be, what pays for their retirement. It’s very rare for that to really be the case.
First, most businesses are worth little or nothing. There’s nothing wrong with that! It’s just a fact of life. Your business may make a nice living for you, but that doesn’t mean that someone else is going to give you money to take it over - the revenue stream may be very much reliant upon your personal relationship with the customers, or it might just be a fair reward for the work and hours you put in. Some businesses are more or less jobs, and it’s unlikely anyone wants to buy your job.
Second, businesses that are worth something are rarely worth life-changing amounts. A typical rule of thumb is that a small business that generates steady profits that aren’t reliant on its owner and are above and beyond a normal commercial wage for them could be worth three or four years’ worth of profits. If you build up your business over 20 years, it’ll be nice to get a bonus of another three years’ worth of income at the end, for sure. What are you going to do in year four, though? OK, if the income generated by your business is miles in excess of your domestic spending, the money you get from selling it might last much longer. But if you’ve got to a place where your business was generating a lot more money than you're spending personally, you’ll have plenty of money saved up anyway and won’t be so reliant on selling the business.
We often hear people expressing concern that they won’t be able to sell their business when they retire. Someone with a well-paid job doesn’t have anything to sell when they step away from it either, but should be able to plan for retirement regardless. As a business owner, you are not immune from having to save up like everyone else!
Comments