Firefly Wealth managing director Adele Martin says failing to pay themselves superannuation is the single biggest mistake SME owners make.
“When I was working in a retiree practice, I’d often see people who wouldn’t get anywhere near [what] they thought they would for their business, and as a result, after working very hard for 30-plus years, they had to live off the aged pension because they had no super built up,” Ms Martin tells My Business’s sister publication, nestegg.com.au.
“Often, self-employed people think their business is going to be their retirement, but the problem with that is their business might not be worth what they thought it was. As technology changes as well, they might find their business has devalued, and you only have to look at the value of taxi plates for an example.”
Accordingly, it is vital SME owners ensure they have a safety net.
“It comes down to not managing their cash flow well. With super, you don’t have to put it away until the end of the quarter and then you get stuck. So I encourage clients to pay it every payroll, and with current technology, it’s a lot easier to do that automatically,” Ms Martin says.
During the early stages of a business, it may be difficult to find the money to do so, but there are ways to ease the process.
“I’ve been in start-ups and know how tough it is. Even if you don’t have enough to put into super, just allocate something, be it just $20 a week,” Ms Martin suggests.
“You can increase that incrementally as you build up your business until you get to your at least what your SG contributions are.”
When it comes to stepping away from your business, it’s essential you plan ahead to allow enough time to sell so as to maximise its final price.
“I’ve had clients who have tried to sell the business with health issues and no plan at 60 years of age ... you’re just not going to get the price you want for it,” she says.
“You’ll have a fire sale instead. You have to plan, allow plenty of time to sell and think ahead.”