Why people don’t plan

Why people don’t plan for their Retirement

Business owners in particular have difficulty ‘letting go’ of their businesses and moving on to the next phase of their lives. There are a number of reasons for this.

The Identity Factor

It’s hard for many owners to leave their companies because the business is their “baby.” For many owners, their lives are identified with being a business owner, and they think they will lose their personal identity once they no longer own a business. They may view their lives after leaving their companies as irrelevant, feel they will lose status in their communities and dread the day they call up other business owners they used to know, only to be brushed off because they are no longer ‘players’. They have not addressed the question ‘who will be when I don’t own my business’.

Similarly, executives and professionals’ identity is very much connected with their work. The prospect of leaving work involves the same realisation – who am I when I am not at my work’?

The Fear Factor

Unacknowledged fear is often responsible for owners procrastinating about what to do with their business. Fear can also cause them to suddenly walk away from the sale of the business due to emotional misgivings.

A kind of Death?

Many owners view the prospect of leaving their businesses as a kind of death, which prevents them from even thinking about creating a retirement strategy. However, not having a plan for post-ownership life can cause owners to want to die at their desks — and that is sometimes where they end their lives.

The Time Factor

A major reason why owners fail to make a successful business transition to retirement is because of costly misconceptions about time. Many owners believe that it is too early for them to plan what they are going to do with their businesses or with their lives after leaving their businesses. Another common misconception is the belief that they do not have the time to make a plan for exiting their businesses. Owners often think it will take no time to sell their businesses, which causes them to walk into a business brokerage or M&A firm and announce that they want to sell their businesses immediately.

The fact is that if owners fail to take the time to plan, they have created a plan to fail. Overnight transactions are not based in reality, since owners will need time to meet with professional advisors such as lawyers, financial planners, etc. with expertise in the Business Succession Planning process. It also takes time to create a strategic game plan, so the owner can get the business into the best operational and financial shape possible to realise the maximum amount of money.

Procrastination

Typically, business owners, professionals and executives generally do not confront their concerns or fears about ‘retirement’ and so they procrastinate when it comes to dealing with these issues.

In my discussions with business owners, professionals, executives and their advisers, there are a number of typical characteristics of people who are resisting the next phase of their lives:

  • The business owner who plans to sell their business ‘in five years’ – five years means ‘never’!;
  • The business owner who plans to sell their business ‘in two years’ – the problem is they have been saying that for over five years now; and
  • A business broker recently complained about one of his clients who, several months ago, told the broker ‘if you can get me $7.5 million for my business I will sell’. The broker exceeded all expectations, and obtained a confirmed and valid offer for $10.6 million, which the business owner rejected!

These are all examples of business owners who do not want to let go of their business for the reasons outlined above.

For this reason, it is imperative that Business Owners start thinking about their retirement well before they hit the retirement age so they can successful implement a strategy of how to best exit their business so they can successfully retire.

Whether you are planning for retirement, looking at transitioning out of your business or are already retired and looking at what more you can do, Transition Planning is here to assist you.

Transition Planning Australia’s retirement planning tools, information and guidance will help you make the right decisions for your life after work and for the future of your business. For more information about developing a plan for your next phase and to discuss your Retirement Plan, speak with Transition Planning Australia today.

 

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