What happens to your business when you stop?
If your retirement depends on selling the business, find out early what it would sell for and whether it can run without you.
If your retirement depends on selling the business, find out early what it would sell for and whether it can run without you.
The business can be the biggest item in an owner's retirement plan, sometimes larger than the pensions and the house together. If it sells at the figure you have in mind, the plan may work. If it cannot be sold, the plan may fail.
Every plan models the business twice: once at zero, once at your figure. The gap between those two answers shows how much of your retirement rests on a sale. Financial planning for business owners shows both answers for a worked example.
Depends on whether the business runs without you. Buyers pay little for a firm whose work is done by the owner alone.
Often more achievable, usually at a lower price, frequently paid over time out of future profits. In the plan that is an income stream with risk attached.
Step back, keep ownership, take dividends. Works well for some businesses and not at all for others, and depends on somebody competent running it who isn't you.
Extract what is there and close the company. Model this one too, because it is the floor.
Turnover and profit matter less than whether the business survives your absence.
This is the biggest factor. A buyer discounts heavily for relationships, quoting and decisions that live only in your head.
Contracts, retainers and recurring work are worth far more per pound than one-off jobs, because the buyer can see next year.
Accounts a buyer can believe without a forensic exercise. A business with three years of tidy, consistent numbers is materially easier to sell.
One customer at 60% of turnover, or one supplier, or one person who knows the system. Each one reduces the price or kills the sale.
Making a business saleable takes two to three years. If you want to stop at 62 and it's 60 now, the window for changing anything has largely closed. Model it at 50, while there is time to act on the answer.
Sales fall through, take longer than expected, or complete in a bad year. A plan that needs the money at 61 exactly is fragile in a way a pension isn't.
How you extract value from a company at the end has significant tax consequences, and the numbers involved are usually large. Your accountant works out those figures, and they go into the plan.
Money paid over three or five years out of future profits carries the risk that the profits don't appear. Model it as staged payments that may not all arrive.
Stopping can cut spending too: the car, the travel and other costs the business was paying. Put those changes into the plan.
If the projection says the business matters and it currently is not saleable, the work has a shape and it takes about three years.
Write down every decision only you can make and every relationship only you hold. That list is the price a buyer would discount. Start handing pieces of it over, and accept that others will do things differently from you.
Clean, consistent management accounts, personal costs out of the company, revenue split so a buyer can see what recurs. A business with three tidy years behind it survives due diligence.
One customer at 60% of turnover, one supplier with no alternative, one person who understands the system. Each one either takes money off the price or gives a buyer a reason to walk, and each takes months to fix.
Take a month away from the business without being contactable. Whatever breaks in that month is what a buyer will price in.
Three years of that work makes sense if the plan depends on the business. Modelling it at zero tells you whether it does. If the plan holds up without a sale, you can keep the business as it is.
Get it valued by somebody who does that for a living, and do it several years earlier than feels necessary. It costs a few hundred pounds and it puts a real figure against something that might be half your retirement plan. Expect the answer to be a range, and expect it to depend heavily on how much of the business walks out of the door with you. In the meantime, model it at zero and find out whether the plan still stands up without it. That answer tells you how urgent the valuation is, and how much time you have to make the business easier to sell.
If most of your retirement depends on selling the business, then in practice it is. That means the bulk of the retirement rests on a single illiquid asset, in one industry, whose value depends on finding one specific buyer at one specific moment. That can be a sound choice, and the business may have been the best home for the money. Make it a deliberate decision. Running the projection with the business at zero and again at your figure shows how much of the plan depends on that one asset.
It has real tax consequences on both sides, and the moment it becomes which pension, which fund and how much, it is regulated advice that Buzz is not authorised to give. What we can do is model both routes side by side in your own numbers, so you can see what each does to the age your money runs out and to how much of the plan depends on a sale. The extraction and corporation tax side of it is a conversation for your accountant, who can tell you what a given approach costs the company. Seeing the retirement effect and the tax effect together lets you compare the two routes in pounds.
Then plan on the wind-down, and establish that at 52 if you can, while there is time to fund the retirement another way. Plenty of perfectly good businesses provide an excellent living for decades and carry no exit value at all, particularly where the owner does the work. What it does mean is that the retirement has to be funded from somewhere else, and knowing it early is what makes funding it possible. It also affects what to do with profits now, so raise that with your accountant early.
It covers what a sale at various values does to your position, when you would need the money to arrive, and how badly the plan suffers if it arrives late, arrives smaller, or does not arrive at all. Deferred consideration paid out of future profits is modelled as staged payments that depend on those profits. Your accountant and your solicitor handle the mechanics of the sale: the valuation, the deal structure, the warranties and the tax on extraction. The plan shows whether the retirement built around the sale holds up.
An hour with a planner on whether the Financial Plan suits your position.
A written plan: every year to age 100 with UK tax applied, each risk measured in years, and your next ninety days.