There were more than 470,000 new businesses created in the last financial year according to the Australian Bureau of Statistics (ABS). The trend of leaving paid employment for a small business of your own is only increasing since the pandemic.
The attraction of working where you want, the hours you want, on the things you want is drawing more and more people away from the traditional route of study hard, get a good job, work hard for 40-plus years, then retire happy in the knowledge that you did your bit to contribute to society.
Starting your own business is an exciting proposition. You have products or services that you are passionate to share with your market, solutions for their problem or pain, and high hopes that your business will secure your financial future.
You know that running a business is not easy, however, it’s a whole lot more fun than working for someone else and making their dreams come true, right?
You spend all your time, energy and money growing your business because you expect that if it is successful one day you will be able to sell it. The sale of your business will secure your retirement plans and allow you to enjoy what life has to offer. What could go wrong?
Well – quite a bit actually. The reality is often a different story.
The scary reality of statistics
The ABS tells us that of the new business created each year, 97 per cent of which are small businesses, 46 per cent will cease to exist within four years of starting. That’s almost one in two who don’t make it to year four, let alone getting to the point of being put up for sale to secure the owner’s financial future.
For those small businesses that do survive, according to the International Business Brokers Association (IBBA) up to 90 per cent of businesses never sell.
Since I’m a bit of a maths geek, I ran the numbers and confirmed that if 90 per cent of small businesses don’t sell, of those that do survive the first four years, that means just 5.4 per cent are put up for sale.
Puts the financial plan into serious perspective now, doesn’t it?
The alternative financial solution
Now that you know the statistics, and after you have taken a deep breath, let me explain the alternative for your financial plan.
The alternative is to use some of the money you are generating from your business to grow your personal wealth now before it is too late.
This may mean a few less toys now so you can put more of your personal money into an investment plan.
Taking control of your money and your financial future will also take some of the pressure off the performance of your business. You no longer will have all your eggs in one basket. I like to call it the plan B which becomes the plan A.
