Talk to any business owner and they will have war stories of hard lessons learnt. It is the best way to learn with the consequences usually not too drastic if the business is still trading.
However, some mistakes can be regrettable long after working life have ceased. Three of the biggest that can create a mismatch between what is desired in retirement and what is possible are:
1) Over inflating what a business is worth.
Blood, sweat and tears have been poured into the business over many years and this can lead to an over inflation of what it is worth in the mind of the owner. I have written before about relying on the sale of a business to fund one’s retirement, it is this perception that means when the time comes to stop working you find what the market is prepared to pay you for your hard work is less than you were relying on. A real problem if your business was your pension.
2) Business and personal plans are not aligned (you don’t even have a personal plan)
Well run businesses run to a plan stating where the owners wish the business to be and by when. Really well run business will split this up into short, medium and long term plans and have it in a format that is readily reviewable and not lost in a filing cabinet somewhere.
Few people have a solid and reviewable plan for their own lives: “what do we wish to achieve in life and by when?”. Most have a vague wish to retire “at some point between 60 and 65” but they don’t really know if they are on track to achieve even these vague objectives.
The problem with this is when the point arises that they wish to retire, if the business is not in an appropriate state to exit and the personal financial position is weak there is no option but to continue.
Those who successfully transition from work to retirement have a clear idea when that will be and what actions need to be taken for both the business and the personal finances to be in a position to facilitate it. This might be in terms of optimising the systems, process and organisational structure ready for sale whilst building up personal wealth (via the business in many cases) and mitigating against likely risks (see below).
3) Not thinking about and planning for likely risks
There is much that can be controlled within a business: having the right people in the right positions doing the right jobs, maintaining key external relationships, planning and forecasting and utilising technology to drive efficiencies to name a few.
It is, however, the uncontrollable risks that can blow a hole in your work and therefore personal life: your illness, disability or death (and the ramifications that has for the family you leave behind), the same catastrophe befalling a co-owner, a recession, legislative or technological change effecting your competiveness and therefore profitability or, perhaps, a co-owner deciding to leave sooner than expected.
Whilst these are out of your control it is possible to plan for them and so minimise their effect: shareholder protection and life assurance can protect you, your family and your partners in the event of a death or disability. Pension and investment planning can reduce your reliance on the business if trading conditions become difficult at the time you wish to stop.
So, any action taken now to guard against these risks will be time well spent and will avoid regretable mistakes that are too late to learn from.