Your business as a retirement fund

George had owned his small general store for the last thirty years. The business had its ups and downs but mostly it had been good. George had worked hard, done long hours and looked after his customers. He believed in the value of putting the profits back into the business to grow it’s value. Over the years he had ploughed most of the profits back to improve his stock levels and smarten up the shop. It looked great now – crammed full of stock and high quality shop fittings.

George’s approach to retirement was to build up the value of his business, then sell it and live off the profits. It seemed like a smart strategy.

Then the unthinkable happened. A huge cut-price retail barn hit town, undercutting George. Sales fell, and with it, profits. George couldn’t compete. The value of his business fell.

George was caught and realised too late his mistake – all of his net worth was tied up in that business, and the business value was dropping. Over the years he hadn’t taken any money out, all the profits had gone back into the business.

If he had his time over, he would take some of his profits out over the years and make other investments to diversify his risk. The business wouldn’t be in such great shape, but George’s overall personal financial position would be much better.