Here is the reality of Retirement, from the perspective of one of our client’s.
Michael and Jean are in their mid-50’s and have owned their earthmoving business for 25 years. They are and have always been actively involved at both a strategic and an operational level. They have worked tirelessly over the years building a business they can be proud of, raising a family, foregoing holidays and time with family and friends in the knowledge that they would retire around 55 and enjoy the fruits of their labour during retirement. When they sell the business, then they will start to live.
This is what we, at Opening Gates, call the WHEN>THEN phenomena.
If you are in business or know someone you care about who is… keep reading because Michael & Jean’s story is very relevant.
This arbitrary line in the sand, called retirement, gave Michael and Jean a time frame, some certainty. It was a way of validating their belief that they really did have to put life on hold while they owned the business, and that it was ok. It got them through the days, weeks, months, decades of working faster, harder, and longer.
“We were sure that our hard work would be reflected in the sale price of the business and we were totally relying on the sale price to fund our retirement”, said Michael.
So the time had come – WHEN was here now.
It became very clear to Michael and Jean that the world had changed since they had set their intentions for retirement some 10-15 years ago. They knew there had been changes afoot, particularly in more recent times, but they had not connected what they were hearing and reading with their own personal circumstances.
Jean explained that, “It was as if we were in a state of denial. We had longed for this time for so long we couldn’t bring doubt into the equation because it would do us in. As it has now”.
So, what changes might impact Michael and Jean’s retirement?
- They will live much longer than their parents had done – so the money they had planned to have as their retirement nest egg would have to stretch further or they would have to work longer to build it up.
- The cost of living has increased – what it would cost them to enjoy their retirement had increased – they would need more funds.
- They will need significantly more wealth to fund their retirement – because they would live longer and it would cost more to live.
- They are competing with a wave of baby boomers for government assistance – the political risk around relying on a pension was higher than ever. This uncertainty worried Michael and Jean. Another reason why they would need to work longer prior to retirement.
- There will be a surge of businesses for sale as baby boomers cash out for retirement – supply v demand equation was not in their favour. The sale price of their business could well be impacted.
- Businesses are valued differently – with weighting shifting away from barriers to entry, stoic, traditional business models and past trends towards innovativeness, relevance to future markets, likelihood of industry disruption, and reliance on people. Michael and Jean realised that they had let their WHEN>THEN mindset limit how far forward they had planned – their foresight had not extended past WHEN. Michael likened it to an invisible wall after which it became someone else’s challenge. They had not planned beyond themselves.
These changes and more are highlighted in recent reports, see the:
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- HSBC “The Future of Retirement” Australia Report September 2014; and
- Commonwealth of Australia “2015 Intergenerational Report – Australia in 2055” .
What were Michael and Jean’s Choices?
Michael and Jean basically had three choices. They could:
- Sell the business and retire;
- Continue in business, doing what they had always done and delay retirement; or
- Continue in business, do it differently and delay retirement.
Of course, there are many combinations and computations but these three choices represented to Michael and Jean the reality of their dilemma.
At Opening Gates we have witnessed this dilemma often as we work with SME’s across Australia. None of these options are easy, and all are extremely confronting for a business owner, particularly at this time in their lives.
Michael and Jean considered each of these three options. They deliberated around selling the business for what they could get, and then living a different lifestyle in retirement to what they had planned. They could do some part time work, sell and downsize their home and hope for support from the government and their families. They decided that they weren’t prepared to compromise how they had planned to spend their retirement years (at least not to this extent), and that this was not an option for them.
Michael and Jean then considered continuing in business and what that might look like for them. They knew that they had two choices – they could continue to do what they had always done and persevere with the same business model OR they could step into the unknown, be flexible and do things differently.
“We considered these two options and we had to ask ourselves if we had the energy to embrace a new way of doing business or if we were prepared to settle with life as we knew it, as it had been for the past 10 or so years.”
Same Stuff Different Day (SSDD) – Persevering with the Same Business Model
Business owners who decide to continue in business as they pass by their WHEN date often do so with low energy, uncertainty, sadness, and a bruised heart. They take this energy into their business and it infects all who come in contact with it – the team, customers, suppliers, the general public. In the past they had been able to leave this attitude in the car park because they were about to retire – just a few more days.
The loyalty effect is loosened and the bedraggled owners watch in despair as their team members and clients leave for more energetic, positive, and relevant businesses.
They have no energy for creativity and innovation.
The value of the nest egg is eroding away. The very reason the owners have persevered, to keep the business going because the sale will fund their retirement – is the very reason that the business will not.
All of this compounds resulting in an outcome, which, without intervention, leads to total disconnection between owner and business.
Impacts are numerous and far reaching. Business owners become less able to self-fund retirement and more reliant on the goodwill of governments, illness prevails, another failed business impacts on consumer confidence, people lose their jobs, suppliers don’t get paid, people with valuable business experience leave the business environment, leases are broken, homes are lost, families impacted and it goes on…
Again, Michael and Jean decided this choice would not serve them – SSDD would not deliver the “after-business life” that they had been hanging out for. Surely there was another way.
There is a Better Way
The better way requires a different mindset and a preparedness to let old habits go. A better way requires business owners:
- To re-ignite the fire in the belly, the passion for the business for as long as it takes;
- To shift away from the long wolf mindset to a more collaborative approach; and
- To harness the power of Intentional Imbalance.
They must be able to pick themselves up, shake themselves off, seek advice and support. They must go back to the business with a new energy, a real urgency around building a more profitable future ready business – a business which will enable them to be in a better financial position to retire at some future date.
Michael and Jean decided to embrace the better way, after taking part in a BUSINESS by DESIGN workshop and becoming very clear on what it would take to keep their passion for life and living high. They decided to invest another 10 years into their business under their new terms, with new intentions. They had to be sure that over the next 10 years the business would enable them to be both financially and emotionally sustainable. And they chose to ask for support, to collaborate with people who would help them to reach their new goals in business and life. Michael and Jean, for the first time ever, sat down and set their intentions for how they wanted to live beyond their roles in the business – they also considered health, family, community, legacy, learning, spirituality and recreation. They began to harness the power of Intentional Imbalance.
For Michael and Jean, it was a case of WHEN THEN + 10.
It is because of people like Michael and Jean that we do what we do at Opening Gates.
We are passionate about working with business owners and leaders of all ages and stages to ensure that they benefit from knowing how to:
- Harness the power of Intentional Imbalance so you don’t have to lose in life to win in business.
- Build a business that enables you to live the life you aspire to and make the contribution you desire to by maximising profitability over the entire life of the business.
- Be future ready. There are business models that are attractive to a buyer and those that are less so – if your plan is to sell then know how to build a saleable business.
Take our FREE online Business Fitness Assessment to find out how Retirement FIT your Business is, in under 10 minutes!
