“There’s going to be a lot of businesses for sale out there,” Tony Kabrovski, a partner at chartered accounting and business advisory firm HLB Mann Judd, told a gathering of SME owners in Sydney last week.
“What is that going to do to the value of your retirement asset?”
Mr Kabrovski quoted recent statistics from the Australian Family and Private Business Survey that showed the average age of Australian SME owners is 56 years, with 20 per cent aged over 65 and 11 per cent aged over 70.
The figures also suggest that close to half (44 per cent) of Australia's SME owners plan to sell their businesses within the next decade.
According to Mr Kabrovski, this potentially poses a significant risk for business owners who view their company as their primary retirement asset.
“I think what's going to happen is there is going to be disappointment with expectations with family businesses. Family businesses put blood, sweat and tears into their business with a view that that will be the goose that lays the golden egg and provides that retirement fund they've been aiming for,” he told My Business.
“Then a lot of business owners are going to find themselves in a situation where they are not going to be able to fund their own retirement, and they may then hold on for a lot longer to their business. That will have a downward trend on valuation because a lot of the time with businesses, if your heart [isn't in it] and you're not passionate about your business, then that usually comes through in the numbers.”
Mr Kabrovski suggested that there are two key actions business owners can take to enhance the value of their retirement nest egg.
“Make it stand out,” he said.
“If you're innovative and you're unique, that will also increase the value. Things like, for family businesses, is your supply concentrated on a small number of suppliers or larger? The same with customers – have you got one or two key clients or do you have a number of customers that are spread, so there is less reliance placed on the top 10 or 20 per cent?”
The other option, which Mr Kabrovski said he is seeing in increasing numbers, is to transfer ownership of your commercial property into your self-managed super fund (SMSF).
“We've seen with a lot of family businesses that the property values go up quite consistently, and that then effectively becomes the retirement fund for a number of our clients, and a retirement fund in the sense that it will continue to receive reasonable yields with rental payments,” he said.