The West Australian, YOUR MONEY, October 31, 2016:
The Small Business Development Corporation, in partnership with Edith Cowan University and the University of Western Australia, is conducting a survey of small business owners in WA to establish how many have financial plans in place for retirement.
National research shows more than half of Australia’s small/ medium enterprise (SME) owners under 50 have no retirement plan, and a third are not contributing to superannuation.
It’s also concerning that nationally, many small business owners are relying on the value of their business to fund their retirement, with a big percentage saying it’s their only source of retirement funding.
We know that 90 per cent of the general population has “pay as you go” as their primary savings strategy for superannuation, but this falls to 34 per cent for small business owners. While these national figures are helpful, we need a clearer picture of the situation among WA businesses.
At the SBDC, we are aware of many middle-aged small business owners who have bought, or are planning to buy, a small business with redundancy payouts or super funds, in the hope of building a bigger nest egg for the future. Others, who may have retired with a big sum of money, are looking to spend their super on a small business to “keep themselves busy”.
This plan is precarious at best. Running any business carries an element of risk, with the major consideration for older business buyers being age versus risk. The younger they are, the bigger the risk they can afford to take simply because they have more time to recover if things don’t work out. The older the buyer, the more “blue chip” their investment should be.
There are also many considerations when selling a business to realise the asset. Does the decision to retire coincide with the best time to sell? Where is the industry at this precise time? Do customers still want the product or has the business become obsolete? As part of a global market, WA businesses are now impacted by world events. A new discovery made nationally or internationally could end the need for a traditional product or service overnight.
Another group of small business owners who are vulnerable to having insufficient funds to retire are self-employed tradespeople and those in the building and construction industries. Long-term contract work, multiple projects and a varied work life can have a detrimental effect on regular contributions to super.
The results of this survey will help us to better provide advisory services for these clients. The survey is now open and all small business owners in WA are encouraged to take part before November 30. Access the survey at: smarbusiness.wa.gov.au.
David Eaton is WA’s small business commissioner and chief executive of the Small Business Development Corporation