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1800 877 741 Every Monday 6:30PM - Channel 31

Retirement spells a huge change in lifestyle as this is the time where you sit back and enjoy the fruits of your success. Gone are the days when building your legacy and tucking away dollars for a rainy day were the main concern.

One of the things most business owners concern themselves with, in the dawn of retirement age, is the decision to sell the business itself. Selling a business due to a lifestyle change differs from selling for financial gain.

For one, most business owners who are selling for financial gain already know that the business is at a financial and operating advantage. They can sell their business with confidence because the personal satisfaction from a successful venture has already been achieved. Now business owners who are about to retire must look at other factors to consider.

Your Business, the Economy, and Yourself

One of these factors includes your retirement income, which could come from savings, insurance, pension, or other investments made over the years. The earlier and easier you have access to these, the more control you have in selling your business.

If you have limited funds, you have a number of scenarios that may become inevitable. You may either be forced to sell earlier at a lower price than expected or be forced out of retirement when funds are running low. Having the option to sell the business on your own terms and time frame requires you to have a contingency plan.

The economy of the country affects every business. When a country is running towards recession, it is harder to sell a business. A recession also affects your financial books as people begin to spend less on products and services even when they are essential.

Fortunately, Australia is in a continuous state of expansion and has not had one single period of recession in 27 years. It gets better as the Reserve Bank of Australia has forecasted a 3% economic growth for this year and a 2.75% growth for 2020.

The last and most important factor is the financial value and structure of the business now and in the future. Every aspect of your business is studied under a microscope. Its daily and periodical activities, cash flow, and liquidity as a whole are under review. Even small changes made in the months leading to the sale can impact the commitment of a potential buyer.

The yearly progress made by your business in terms of profit, return on investment, and technology is measured against each previous year. A financial forecast gets better when a business is obviously run smoothly and when cash flow sufficiently covers operating, investing, and financial costs.

The price

Before you sell your business you will, naturally, have a number you think it is worth.  More often than not, the true value will be less once the price of the business is actually calculated. Generally, the three main components that determine the price of a business are:

  1. The goodwill, including intellectual property of the business
  2. Any plant and equipment including digital assets of the business
  3. Any stock or inventory that the business owns

 Planning Under Expert Guidance

Deborah Rognlien of The IF Group Melbourne suggests a thorough consultation with a reliable financial planner when considering the sale of your business as part of your retirement. Getting a financial planner opens you to valuable insight. This includes preparing and presenting your business to handling the proceeds of the sale for a more comfortable and stress-free retirement.

If you are considering selling your business heading towards the end of the financial year, don’t miss our interview with Deborah who explains the lucrative tax advantages available to those selling their business. https://www.youtube.com/watch?v=mD__JMHLzXU&feature=youtu.be

At Dollars With Sense we have partnered with experienced professionals from many areas of the finance world. If you have a finance question you would like answered, simply your details below and one of our friendly and knowledgeable team will be in touch.

Alternatively you can send your query to contacts@dollarswithsense.com.au


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