I recently had the great news that one of our former clients has sold their business for quite a few million pounds. When they started working with us, they were struggling to grow the business because they were working IN not ON it. After 2 years of working together, we turned that situation around, enabling the business to grow rapidly. 5 years later, they were offered a sum of money for the business that they just could not refuse, and have achieved financial freedom. What a great situation to be in!
While all of our clients are working towards the same final goal, it still amazes me when I meet new business owners that they have often not given their financial freedom any thought at all. One thing they do agree on is that they don’t want to go on working until they die. Although they know that the state retirement pension isn’t adequate to support a reasonable standard of living, very few have managed to put enough money away to retire on. This means that, sadly, many of them are faced with the real possibility of having to keep working into their later years, when they should be enjoying the fruits of their labours.
Achieving financial freedom
What business owners need to understand is that their business is their key to future financial freedom. By financial freedom, I mean getting enough passive income (i.e. that you don’t have to work for) when you need it to support you comfortably in your retirement. In order to achieve this goal, business owners need to start thinking differently.
So how do you actually achieve financial freedom? Well, what you need to do is accumulate a portfolio of assets that will provide you with the regular income you need to live the life that you want. Those assets may include e.g. a property portfolio, a pension scheme, stocks and shares, precious metals, forestry, whisky or a hundred and one other things. What you choose to invest in will depend on your attitude to risk and your interests. I have one client who is investing in cars, and combining his hobby with his pension pot!
Obviously, you’ll need to have the funds available to invest in enough of those assets to earn an adequate income, and that funding will probably have to come from selling your business. So as a business owner, you need to be thinking about being able to sell your business for a sum you can retire on, and developing a plan to achieve that goal.
What you need to be doing NOW
It’s never too soon to start working towards your financial freedom. Here are the steps you should take to move you in the right direction:
- Decide WHEN you want to retire – this will give you the time frame in which you need to build your business into a saleable asset in its own right.
- Determine WHAT is the amount of annual income that you’ll need to enable you to have the standard of living that you want in your retirement.
- From step 2, you can calculate HOW MUCH the retirement fund is that you’ll need to provide the level of income you want. (But remember, at today’s investment rates of say 5% return, a £1 million retirement fund will only give you £50,000 of annual pre-tax income – being a millionaire is not what it used to be!)
- The final step is to set about building your business into one that a potential buyer would pay that amount of money for. Obviously, achieving this step this is going to be a lot of work for most business owners, and it’s not something that happens overnight! In fact, from our experience of all the business we have worked with, this process usually takes between 3 and 10 years, so you really don’t have time to delay getting your action plan in place!
The key factor to remember is that you must PLAN to sell your business before you HAVE to sell it. You don’t own a job for life, you own a business that is there to be sold to give you a life.
This may seem a daunting task, but you don’t have to face it alone! At ActionCOACH, we can help you to achieve your financial freedom in a number of ways:
- Providing a comprehensive valuation for your business
- Helping you develop a plan to grow your business to where it needs to be
- Coaching you to implement your business growth plans.
Why not book a free business review session with us, and take the first step towards financial freedom now!
Book your session HERE.