What is the right age to retire?
(updated September 2022)
What is the best age for business owners to retire?
Many business owners expect that when they reach a certain age, they can simply sell up and retire.
But a recent study by business adviser BDO found that 15% of SME directors in the UK are over the age of 66 – with 10% older than 70! And while some always planned to work longer, the reason many are still working is because they failed to plan to sell their business.
According to BDO, many business owners don’t have an exit strategy and do not realise what it takes to sell a business.
They say, “If business owners can’t transition out of a company, then the years of building up a business to enjoy a comfortable retirement can actually end up with a director working well into that retirement. An exit strategy should be part of an owner’s business plan even from the beginning.”
What is the best age for business owners to retire?
The age a business owner retires differs depending on personal decisions. Some choose retirement based on when they feel they’ve given all they can and want to relax.
We often work with sellers in their 70s and even 80s who are still running good businesses. Meanwhile, some people in their 50s are selling up to change gear or pursue a hobby. The truth is age doesn’t matter – retirement does not have to be at 65.
If you want to retire early, it’s important to understand what kind of lifestyle you will enjoy once you leave the workforce. Will you be able to travel? Do you like spending money? Are you interested in starting a new business? These factors all play into whether you should consider retiring earlier than planned.
Planning an exit strategy
When planning retirement, business owners need to ensure that it’s in good shape with plenty of growth opportunity ahead. Businesses that stagnate for a number of years while the owner waits to retire are least attractive to buyers. This is because the full potential of the business has not been demonstrated for some time. To sell a business successfully, and for optimum value, owners need to maintain their enthusiasm and exit when they are at the top of their game.
We recently worked with a client in his mid-50s whose business was well established and highly profitable. As a result, it was in a prime position for a larger company or investment group to acquire it for growth.
Having built the business from scratch over the last 20 years, the owner felt that he personally put all he could into the business and that a buyer with more focus and energy would be better placed to take the business to the next level. He decided it was the right time to sell the company rather than wait another 10 years until full retirement age.
We are coming across this scenario more and more in the post Covid era.
The next generation
Some business owners worry that if they retire, they’ll quickly age, so continue to run their business in their 70s and 80s. That’s fine but remember that your business is an investment and that needs considering along with any other inheritance planning to realise its value for the next generation.
If you do decide to keep working after retirement, it may be worth considering whether you want to work part-time or take on a new role at home or elsewhere. It might be worthwhile exploring what you really want from life post-retirement. What will you miss? How will you fill your days? And how will you feel once you stop doing something you loved?
5 points to consider about retirement
- Retirement does not have to be at the age of 65.
- Plan ahead, prepare your business to sell well - Don’t let your business stagnate.
- Sell your business while you are still enjoying it and the business is going well.
- Realise the value of your business in good time so that your wealth can be passed on to the next generation.
- If you don’t wish to retire, you can still sell your business but take a consultancy role or non-exec directorship.
If you want to plan for the sale of your business, then you can contact our offices today.
