• she-said

Are you minding your own (small) business?



Not that long ago, She wrote about some enterprising thoughts for possible working scenarios in retirement that She's been conjuring following on from Her considerable success and heightened profile after winning 2013 Highlands Cook of the Year. If you missed these I recommend your revisiting them....here are the links to both:

  • Put your "Entrepreneur" hat on!

  • A working retirement!

You will quickly identify the key essential ingredient for a successful business pursuit - whether you've already retired or not - is "passion". Simply, you MUST BE passionate about whatever you are undertaking in order to be successful - a mediocre approach (i.e. anything less than passionate) will at best produce only a mediocre result! Of course it is also my strong belief that you should do things in which you are knowledgeable, skilled or proficient as to undertake a completely foreign endeavour on a whim with little or no knowledge or expertise will likely prove not only difficult to establish but also extremely difficult to sustain - so best my suggestion is "stick to your knitting".

Of course the third and often overlooked essential element is proper "planning and administration" and that's where I come in. For any good idea to succeed commercially, it must first be well planned and once underway, properly monitored. So it is essential to prepare a sound Business Plan which consists of both a narrative section and a financial section. If this document does not present a viable undertaking in theory, then it will be unlikely to succeed in practice!

The narrative section should be your best expression of the passion you feel for the proposed business


undertaking, starting with your Mission Statement - a succinct and simple summary in just one or two sentences of what your vision for the business is. The briefer and more succinct it is, the better chance you have of putting it into action. And from your initial Mission Statement will inevitably come your corporate bi-line, your unique slogan by which others will recall and identify your business. After this should come the detail - your analysis of the markets, the economic climate, your competition, your SWOT (strengths, weaknesses, opportunities and threats) analysis, your objectives and your plans (where will it be, what resources will I need etc) to put your vision into motion. Obviously the more detail and analysis you include, the easier your business will be born! But you cannot avoid the financial analysis - your projection of the start up costs and at least the first one or two years of operation factoring in all of your conservative estimates of revenue and the costs needed to run the business. Certainly the key to all of this is your strongly grasp of the revenue drivers and your pricing structure - without knowing your sales mix and the attaching prices you cannot possibly understand or project your top line forecast. Equally, you need to project the underlying costs of sales and also the administrative costs to keep your business afloat. But, without a strong grasp of the likely income, all else is superfluous!


Once your business is up and running, do not put your business plan away out of sight - keep it on the table as your reference to keep you focused and your business on track - it is a living document and if needs be, it can be updated to reflect fundamental changes or deviations from your initial forecasts and direction for the business. And of course, you soon realise there are dynamics you could not have anticipated such as overdue receivables and other aspects of cash flow. One thing we embraced in our business when we had it was "early settlement discount". While our normal payment term was net 30 days, we always offered a 10% discount for 7 day prompt settlement and notably, most of our clients took advantage thereby providing us with a much stronger cash flow and a significantly reduced debt exposure - a win-win for us without doubt!!

As retirees there are some business no-no's we must avoid at all costs - no mortgage of personal assets, especially the home, to fund your small business activity - you need to be risk averse at this time of your life as you no longer have youth on your side to recover from a business failure; only deal in cash and avoid credit transactions wherever possible - always remember, CASH IS KING and in my view the sale is never complete until the proceeds are safely deposited in the bank!! No doubt your business motivation as retirees is more to keep you involved and occupied rather than so you can amass great fortunes! Accordingly it should be undertaken with less risk exposure though I do know there will be exceptions to this norm. So you will still need to employ all the normal sound business disciplines to ensure you do not fail. You know, we recently came across a couple in desperate straits having opened a business with their superannuation funds for something to do in retirement. They invested in a retail gift shop in a high street mall about 6 years ago - a year before the GFC and in a business in which they had no previous experience. After an initial year of buoyant sales, the last 5 have been absolute purgatory for them and they are now desperately trying to exit having lost their entire life savings. Such a sad story, but so often heard!!

But what of those over 50s who are working hard towards a well earned retirement?

If you have a viable small business it is critical that it is packaged to maximise its sale potential. When in corporate life, I often reviewed target businesses for acquisition which were so poorly presented - family businesses which carried the costs of the weekly household grocery bill and the weekly fuel refill of the family car! If you do this for short-term gain, you can as easily jeopardise the sale of your business because of its seemingly poor profitability. There are three things I suggest are crucial to the effective sale of your business and proper realisation of your retirement nest-egg:

  • it MUST have a living business plan;

  • it is properly budgeted and accounted for - stand alone, even audited, accounts with all current tax and regulatory obligations completed and filed;

  • it has a succinct and dynamic Information Memorandum (only to be issued on a strictly confidential basis after signing confidentiality/non-disclosure agreement) ready for prospective buyers to consider. It is a brief overview of the business, its structure and what is for sale (is it a share sale or specific asset sale?), its market space and review of its regular clientele, and a financial performance synopsis of at least the most recent 3 years).

If you are in selling mode and aspiring to a leisurely life of retirement, you will certainly be aware of your market players, who is acquisitive and who is not, the normally accepted market PE ratio range for determining a reasonable price range for your business. This will of course help you to gage how genuine or realistic any price offers are - and my suggestion is not to be greedy!

If you are in any way concerned about the whole sale process, it is essential for you to engage trusted advisers - your legal adviser, your external accountant or tax adviser - and in some cases a business broker is a wise engagement as they are more able to keep your sale process confidential and away from key competitors and will often be aware of potential buyers looking to enter your market space and successfully broker the sale for you. There is no point being foolhardy by going it alone - the more professional advice and help you have, whilst it will cost, will likely also save you in the long run!

Whichever side of the retirement divide you are on, the whole intent is to make your business work for you, not you working for it.

  • If you are selling a business in order to retire, your objective is clear: to maximise your retirement nest egg

  • If you are retired and contemplating a business activity to occupy you, your objective is equally clear: you should be risk averse and protect your hard-earned nest egg.

...and remember...have a fabulous retirementLIFE....


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