Listed in: Selling & succession

A small business owner’s guide to retirement

How to plan for your dream retirement when you’re busy running a business.

3 minute read

When you’re running a business, a retirement plan is often the very last thing on your to-do list. However, when it comes to preparing for life after your business, it’s never too early to start. We’re helping you get the ball rolling with our small business owner’s guide to planning for retirement.

If you’re planning to sell

For a lot of business owners, the plan is to eventually sell the business, and use the profits to fund your dream retirement. Yet it pays to be realistic, you may not find a buyer willing to pay your ideal price, especially if you’re looking to sell quickly. Even if you’re planning to work well past the age of retirement, unexpected changes in your health – or the market’s – could force a speedy sale. If that should happen, you’ll need to be prepared.

Give yourself time

If your plan is to sell, try to give yourself a good amount of time to prepare. Many buyers will request to see three years’ worth of business finance records. Plus, you may need the time to work on building your business’ profit margin and market valuation – whether by updating equipment, carrying out maintenance work, or building your sales revenue with online advertising.

Keep in mind that a potential buyer will be invested in the business’ future, so they’ll be looking for positive but realistic numbers.

Protecting your business with insurance is also crucial. Should you be unable to work, the right insurance can help keep you from accumulating debt. It can also give you the ability to pay someone to keep things running while you’re out of action. 

Planning for succession

The idea of handing your business over to a family member or employee might sound simple, but you should still give yourself ample time to go through the process. Consider the following:

• Do you want to maintain a controlling stake in the company?
• If there’s any property involved – for example, the premises – who will own it?
• If your successor wants to purchase the company from you, do you know whether they have a strong chance of getting a business loan?

A clear plan will tick off all these queries, and will help make for a smooth transition with maximum benefit and minimal disruption. 

Saving for your retirement

As a small business owner, you might be tempted to put your spare funds back into your business, rather than into your savings. But you can’t guarantee your business will provide enough revenue to cover your retirement, so this can be a risky decision.

Living longer

These days, humans generally live longer. That means you could end up in retirement for decades, and you should ideally have enough saved to keep you covered well into your nineties.

A lot of business decisions are informed by a desire for long-term financial security, so have a think about the kind of lifestyle you want. Government pensions can offer up a safety net, but it’s best not to solely rely on this income. As a benchmark, if you own your own home, you’ll generally need about 70-80% of your pre-retirement income to maintain your current living standards.

Successful retirement planning is a long-term commitment. As your life changes, your spending habits are sure to change as well, so your plan needs to be flexible enough to evolve with you. Start working on your plan today, and down the track you could be enjoying the retirement you always dreamed of.

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This material is for general information purposes only and does not constitute, and is not intended as, personalised financial advice or as a replacement for legal advice. BNZ strongly recommends you seek advice specific to your personal financial or legal situation from a qualified adviser. Neither BNZ nor any person involved in the material accepts any liability for any direct or indirect loss or damage arising out of the use of, or reliance on, all or any part of the content.