Retirement planning for entrepreneurs


Retirement, that 10 letter word that we know and try to plan for but try equally as much to put it out of our mind. Seeing that we spend about a third of our life working, it stands to reason that losing that aspect of one’s life can be daunting. From an entrepreneur’s perspective, the decision and planning for retirement increases due to the add complexity of owning your own business.

In this article, we interviewed Fabio Brogneri, a Financial Planner with Envestpro on his views on retirement from a financial planner’s perspective. Additionally, we interviewed Michael Muller, CEO of CompassPoint Consulting as to his views on retirement when it comes to your business.

Interview with Fabio Brogneri

1. The Retirement Maze: With so many different retirement products on offer today, what are the biggest financial mistakes people make when planning for retirement, and your pro tips for them to consider in this regard?

Navigating the retirement landscape can definitely feel like wandering through a maze with endless turns and so many choices to make. The biggest financial mistakes I've seen people make are putting all their eggs in one basket or, conversely, spreading their investments too thin without a clear strategy. It's like trying to bake a cake without a recipe; you might end up with a mess. My pro tip? Get a solid plan that balances risk and reward, and make sure it aligns with your long-term goals. It's not just about picking products; it's about crafting a plan and strategy that gets you to your destination.

2. The Space Between: After deciding on a retirement plan, is it best to leave it up to your financial planner and hope for the best, or is there a recommended monitoring process you would suggest?

Leaving your retirement plan on autopilot and crossing your fingers isn't the way to go. It's like planting a garden and never watering it; you can't expect it to thrive. I recommend a regular check-in process, at least annually, to ensure your plan is still aligned with your goals and market conditions.

3. The Retirement Pot: How does someone know if they’re saving enough towards their retirement, and tips for catching up if behind?

Figuring out if you're saving enough for retirement is a bit like trying to hit a moving target. It's not just a magic number or a thumb suck; it's about your lifestyle, goals, and also planning for the unexpected. Financial Planners have access to all the right tools to help clients track and monitor where they are for retirement and what needs to be done or changed if they are not on course. To catch up if you're behind, consider ramping up your savings, delaying retirement, or adjusting your lifestyle expectations. It's never too late to course-correct, but it does require some honest reflection and strategic planning.

4. Business for Sale: If a person has their own business, can they rely on this as a retirement plan?

I find this question being asked by a lot of my clients and it’s a really interesting topic. Entrepreneurs often view their businesses as the golden egg for retirement. The thrill of the chase and the passion for their work make the concept of retirement feel almost alien. It's like being in a love affair with your business; you're so invested in it that the thought of diversifying seems like betrayal.
However, the harsh reality is that relying solely on your business for retirement is risky to say the least. The statistics are sobering, with only 20% to 25% of privately owned businesses ever finding a buyer. The value of your business is often intertwined with your personal skills and relationships, and as you age, so might the relevance and revenue of your venture. Factors beyond your control, such as market shifts and technological disruptions, can further erode the value of your business.

To mitigate these risks, it's crucial to balance your business with a well-diversified portfolio. Think of it as not putting all your eggs in one basket. By investing in unrelated assets like retirement funds, unit trusts, and shares, you spread your risk and increase your chances of a financially secure retirement. Moreover, diversifying allows you to take advantage of tax breaks and ensures that your business growth doesn't come at the expense of your retirement security.

5. Avoiding Withdrawal Stress: Once the decision to retire is made, what are the next steps to ensuring a relaxing retirement with little stress?

Once you've decided to retire, it's all about planning your exit strategy. These conversations often need to happen years before you actually retire to ensure a smooth transition. Consider your withdrawal strategy, tax implications, and how you'll manage your investments. The goal is to transition smoothly into retirement without financial hiccups. The more planning you can do and the clearer you can imagine what your retirement looks like the easier the transition will be.

6. Peaceful bliss: Retiring can be daunting for most, what are some of the tips to making this a peaceful transition, and what they can look forward to?

This is where I feel like I can offer the most value to clients, because as much as retirement is a financial event it is also a life event and there are so many changes that come with retirement, so yes we can plan for the financial because they are crucial but you can’t ignore everything else retirement is about. I have broken down a few key points below:

  1. Define Your Purpose: Retirement is not the end, but a new beginning. Take time to reflect on what brings you joy and fulfilment. Whether it's volunteering, hobbies, or learning new skills, having a sense of purpose will keep you engaged and happy. I often find that especially with business owners, when they retire, they lose their identity and it’s important to fill that whole with another purpose.
  2. Stay Connected: Maintain your social network. Keep in touch with former colleagues, friends, and family. Join clubs or groups that align with your interests to meet new people and avoid isolation.
  3. Embrace Routine: While the freedom of retirement is exhilarating, having a daily routine can provide structure and prevent aimlessness. It could be as simple as a morning walk, a regular coffee meet-up, or a scheduled hobby.
  4. Focus on Health: Invest time in your physical and mental well-being. Regular exercise, a balanced diet, and activities like yoga or meditation can keep you healthy and energised.
  5. Lifelong Learning: Retirement is a perfect time to pursue learning. Whether it's taking a course, attending workshops, or simply reading more, keeping your mind active is key to a fulfilling retirement.
  6. Travel and Explore: If you've always dreamed of traveling, now is the time. Exploring new places can provide fresh experiences and perspectives.
  7. Give Back: Consider volunteering or mentoring. Sharing your knowledge and giving back to the community can be incredibly rewarding.
  8. Plan for the Unexpected: Be open to change and adaptable. Life may throw curveballs, and having a flexible attitude will help you navigate them gracefully.

Interview with Michael Muller

1. The Retirement Maze: What’s the biggest challenge entrepreneurs face entering retirement, and your top tip for navigating it?

For a business owner, whose life is intricately woven into their business, retirement seems like a foreign word, but ultimately the time comes when you need to slow things down and consider your retirement. One of the biggest challenges faced by entrepreneurs when planning for retirement is what to do with my business when I retire. After working hard for many years, enjoying a good retirement should be top of mind, not worrying about your business whilst on retirement. If you are fortunate enough to have family that have taken over your business, then all I would say is enjoy retirement, but if not, you are faced with 2 main choices, sell or keep as a retirement nest egg.

Regardless of the option you select (sell or keep as a retirement nest egg), your business needs to be geared correctly in advance to ensure that you have a seamless transition into retirement. In most cases, the owner of the business is the business, so if they were to abruptly leave today the business would not function. Hence why it is key to ensure that you gear your business towards retirement.

This is where CompassPoint Consulting can offer value to clients. We conduct a review of your company and make necessary recommendations for change to ensure that your company is in a good position to choose an option when approaching retirement, and includes:

- Management Structure, Roles and responsibilities review.
- Management Controls review.
- Recommendations for change.
- Implementation of changes (where required).

2. Succession Strategy: What’s the key move in passing the business baton smoothly?

When deciding to keep your business as part of your retirement plan, you need to ensure that you have adequately structured your business and implemented the necessary controls to oversee it whilst on retirement. Passing the baton to someone else can be a scary and daunting task but is necessary to ensure peace of mind. It is important to consider things like who is going to take over from you, the experience and training needed and the time they will need to work alongside you to gain the necessary insight. Additionally, in order to oversee your business whilst on retirement, you will need to have management controls in place to enable this, such as budgets and monthly management reports, monthly review meetings to ensure all is on track and other business controls.

3. The Finances: For a solid financial retirement plan, what’s the cornerstone piece of advice you give entrepreneurs?

The age old saying, failing to plan is like planning to fail, couldn’t be truer when it comes to creating a solid financial retirement plan. Early on in your business, you need to consider the type of retirement you want to have from a financial perspective together with your financial advisor. Understanding all your retirement aspirations like overseas trips and buying that Ferrari is key to building a solid financial retirement plan inclusive of your business. Additionally, timing is also key, as these plans take time to mature and cannot be done the year you intend to retire, so start as early as possible.

4. Avoiding Pitfalls: What’s the most common retirement planning trap for business owners, and how can they avoid it?

For me it is relying solely on your business to fund your retirement. Whilst adequately structuring and putting controls into your business is extremely beneficial and will add great value to your business value, having only your business as your retirement plan is dangerous. Things like exchange rates, competition and consumer habits to name a few, can very quickly change the outlook on your business down the road. Events like the 2008 market crash and the last few years have closed many business’s doors. I always advise clients to have a combination of a well-structured and controlled business as part of your retirement plan, together with financial savings as advised and planned with your financial advisor.

5. New Beginnings: Transitioning from the identity of a business owner to a retiree is a profound shift, what’s the one thing they should get excited about?

Having spent more than a third of your life working and building your business, staring down the retirement barrel can be scary, however, having correctly geared your business for retirement or sale, as well as saving towards your retirement plan, should bring you comfort that your financial retirement will be sound. So, when transitioning to retirement, instead of worrying about next month’s sales, or payments to suppliers, you can now enjoy that relaxing cocktail at your favourite Mauritian getaway having peace of mind that you’re your financial future is secure.

As can be seen from the above interviews, retirement planning for entrepreneurs is a multi-pronged approach, including both personal retirement planning, as well as planning for retirement from your business.

Contact Details:

Fabio Brogneri
Financial Planner
073 443 7717

Michael Muller CA (SA)
072 997 4822