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10 April 2013 Posted by 

How to approach retirement with confidence

By David Ley Director

Thexton Armstrong Ley

TOMORROW morning at 7.00am I am meeting with a friend of mine (lets call him Joe-not his real name) who has been running his business for over 30 years.

Joe has a reasonable business in the financial services industry and today Joe is earning a comfortable living wage for a professional person.

Not a huge amount of money, but still an amount that is well above the average wage in Sydney.

The business is solid but is going backwards. His billings and earnings for the year just completed are down on last year, and substantially down on the year before.

So why did Joe call me and ask me to drop by at 7.00am for a chat. Joe is over 60-years of age and he is now starting to think about his retirement.

He is quite worried about his future and is finally going to do something about his dire situation. For a person in the financial services industry Joe has been fantastic to his customers, working tirelessly for his clients, but has insufficient superannuation to fund his retirement.

Joe’s focus all his working life has been to do the very best that he can for his clients, a worthy mission, but regrettably, on its own is not enough to have a happy retirement.

The business is saleable, but at current earnings is nowhere near valuable enough for Joe to have a comfortable retirement.

On current life expectancy, Joe will have to fund his retirement for about 20 years. After taking into account all the things that Joe wants to do, we estimate that he will need close to $3m.when he eventually retires.

Joe has committed the greatest sin in business. He has spent all his life working in his business doing a wonderful job for his clients, but he's failed the first and most important test for running a successful business. He has not taken time to work on his business.

Here is a list of activities that should be undertaken annually:

 • Examine the strengths, weaknesses, opportunities and threats facing the business.  

• Understand and develop the core competencies in the business.

 • Work on improving the businesses competitive advantage.

 • Plan how you will boost sales with those customers that are the most profitable, are easy to do business with and pay their bills on time.

• Set out objectives to control cost increases. Reduce costs by competitive tendering for all services.

Each of these activities should proceed your annual budget review process where you set your budget, which must include your personal and business objectives for the year ahead.

So now Joe is tired, demotivated and finds himself in the position where his business is going backwards.

He needs to prepare for retirement in the next five to seven years. As he has little savings, his business is his future and will need to be sold or provide an income stream to fund his retirement.

So what advice am I going to give my old friend Joe?

Firstly, Joe needs to get himself motivated. Easier said than done, especially for a person who is over 60 and not as fit as he should be. To be great in business you need to be mentally alert, to be mentally alert you need plenty of sleep and you need to be physically fit. Get some professional advise on your diet.

Joe needs to start getting up early every morning to go walking or jogging, or get himself a personal fitness coach.

Secondly, if you only have five to seven years left in business, you had better make them count. Work out how much you need to earn from the business, and set up a plan to turn the business around.

You need to grow the earnings every year from now on, and over the next five years plan to double the earnings.

You are not going to do this on your own. If you had the capability then you would have already done it. You need to find a well respected business consultant who will guide you through the process.

Finally my advise to Joe is to take in a younger partner. We all know how hard it is to change. “It is not the strongest of the species that survive, nor the most intelligent, but the one most responsive to change.”  According to  Charles Darwin.

A partner will provide energy, motivation and much needed capital boost to the business. The right partner will be more savvy regarding the latest trends in technology and will be motivated to grow the earnings.

A partner will be willing to offer new services to existing clients, organically growing the revenue stream and at the same time, bring in new clients. New blood will bring change.

Naturally Joe should take advantage of the current superannuation laws. He needs to get as much of his income into Superannuation as the law allows ,as this just makes common sense.

There are too many small business owners approaching retirement who have insufficient savings to fund their retirement.

The future is bleak for those who see the signs and do nothing. If this is you or someone you know, then get advise from a professional who is best able to help you.

David Ley can be contacted at david.ley@thextonarmstrong.com.au



editor

Publisher
Michael Walls
michael@accessnews.com.au
0407 783 413

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