RETIREMENT PLANNING
Save the best for last Many salon owners assume their business will fund their retirement, but without careful planning and forethought you could end up disappointed, warns Mark Ridout. When it comes to hanging up the scissors, many salon owners, perhaps even most, assume they will be able to “cash in” all the hard graft they have put into building up their business, using the lump sum from its sale to realise those dreams of a villa in sunnier climes or just being able to relax without having to worry about where every last penny is coming from. But how realistic is this, especially in the current climate of a “buyer’s market”? How can you ensure you get the best return, the best value, for your salon when the time does come to sell up? The first thing to say is, yes, it is possible to turn a salon business into a viable retirement fund, especially if you have more than one site to sell.
Be realistic
RETIREMENT DREAMS: THINK AHEAD
owner, you need to be able to show there is a proper succession in place and the business will be sustainable beyond your departure. Even if you are selling on to one of your managers or stylists you need to ensure the business is sold for a fair and achievable market value. We, for example, offer a valuation service perfectly suited for internal transactions to ensure both sides achieve a fair price.
However, it is also true many small business owners do tend to over-estimate the worth of their business, and so can risk ending up disappointed. A common pitfall is to assume that, Plan ahead just because the business is providing you Finally, you do need to think ahead. We with a good income, it is equally going to advise a minimum of five years from be a cash cow for any prospective buyer. thinking about selling to carrying it What a purchaser – whether an external through – so recognise you’ll need to buyer or someone you are wishing to sell be working until 2017 at the business on to – will be least! For the first two years looking for is a sustainable, you should be ensuring profitable enterprise. Any the business is in tip-top bank or financial intermediary condition and then for backing a buyer will also want the final three working to to be sure they will get back keep costs down, increase what they have invested and sales and just making it as there is long term potential. attractive and saleable as So, ensure overheads possible. are trimmed as much as is This may sound a long realistically possible and Mark Ridout is a wait but, after all, it is about all cash coming into the business valuation making the rest of your life business is visible on paper. specialist and as financially comfortable as Particularly with a business director of RA possible, and what could be where its identity is very Valuation Services more important than that? much wrapped up in its
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How to maximise your retirement income A pension is a natural starting point for anyone looking for income in retirement, but there are other options, writes Stephen Womack. A maximum of £50,000 per tax year can be paid into a pension – providing you have the earnings to do so. It is also possible to roll over unused allowances from three previous years, giving a potential maximum of £200,000. What this does mean, however, is that if you want to use the proceeds of a business sale to top-up your pension the deal may have to be structured carefully. Speak to your accountant about this well in advance. Be aware, too, pensions are not the only game in town, particularly if you are looking to “take” an income from a lump sum sale of a business. One option is to invest in a series of Isas. These allow you to save (as of April 2012) up to £11,280 per tax year. Up to half of this can be saved into a cash account. Or the money can go into funds, such as unit trusts or shares, investing in stock markets across the world, as well as in bonds, property and commodities. While there is no up-front tax break, income from Isa investments is free from further tax. And, unlike a pension, the entire value of an Isa is accessible so if you need to get at the cash you can. In practice, most savers use a combination of pensions, Isas, building society accounts and other investments to build up a viable retirement income. For a big decision such as this, it is to wise take independent financial advice, and be prepared to pay a fee for quality help. You can find advisers through websites such as unbiased. co.uk and financialplanning.org.uk. Stephen Womack is personal finance correspondent for the Mail on Sunday newspaper and author of The Financial Mail Complete Guide to Planning Your Retirement.
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