Owning a business – whether as a sole trader or a company – is hard work. The responsibilities are immense, the tasks are numerous and the hours can often be long.

Depending on the size and type of business, business owners can play a multitude of roles, including payroll, customer relations, safety officer, not to mention the roles the actual business carries out in its day to day operations. Although this makes it little surprise that many small business owners ignore retirement planning, there are ways owners can plan once it’s time to step away from their business operations.

Financial Constraints

One of the key reasons why small business owners ignore retirement planning is financial constraints. A major problem small businesses regularly encounter – particularly in their early years – is a lack of stable and viable cash flow.

According to a recent [MYOB Business Monitor] Survey, 53 per cent of business owners expected to have consistent problems with their cash flows, something which has been blamed on late payments by larger businesses. Cash flow problems also increase pressure on business owners to address other major priorities for their business, including rental payments on the business premises, maintenance of assets and the payment of employees’ wages and super.

Despite the major obstacles business owners face, it is imperative for them – especially sole traders – to plan for retirement as early as possible. This is because, with businesses run by sole traders, it is often the sole trader themselves who are the business’s most valuable asset, which can make the business worth less when the trader decides to retire.

Lack of Financial Planning Knowledge

The other major reason why some small business owners ignore retirement planning is a general lack of financial planning knowledge. While a business owner may have a firm grasp on managing the finances of their business, this is significantly different from financial management and planning for retirement.

Self-Managed Superannuation Funds (SMSF) have grown in popularity over the past decade, largely due reduced tax rates and the increased flexibility in the sorts of assets one can acquire with an SMSF. However, there are many laws regarding setting up and maintaining SMSFs that need to be followed, which deters many busy business owners from establishing an SMSF. A competent accountant or financial planner can create an SMSF on a business owner’s behalf and invest in areas they are most comfortable with.

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