For many entrepreneurs, their business is their retirement plan. Years of hard work, calculated risks and reinvested profits are often driven by the belief that one day the company will be sold, unlocking the wealth needed to fund later life.
But relying on a future sale alone can leave your retirement exposed.
The latest Department for Work and Pensions Family Resources Survey shows that just 21% of self-employed people participate in a pension scheme, compared with 80% of employees. Without access to automatic enrolment, many entrepreneurs could reach later life with much of their wealth still tied up in their company.
If you’ve spent years building your business, it’s worth making sure your retirement is just as well planned.
At a glance
- Your business shouldn’t be your only retirement asset.
- Know what your future lifestyle could cost.
- Build wealth outside your company.
- Give yourself time to prepare for an exit.
- Factor tax into your plans before you sell.
Your business has value. It doesn’t guarantee income.
Building a valuable company is one thing. Turning that value into dependable retirement income is another.
Research from Direct Line business insurance found that 14% of small business owners and sole traders expect to continue running their business after drawing their pension because they cannot afford to retire fully, equivalent to an estimated 740,000 people.
A business valuation is not cash in the bank. The amount a buyer is ultimately prepared to pay can depend on profitability, growth prospects, market conditions and how heavily the company relies on you.
If important customer relationships, strategic decisions or specialist knowledge all sit with the founder, a potential buyer may see greater risk. A downturn in your sector could also affect the price or timing of a sale.
If much of your personal wealth is tied up in the company, your retirement plans could depend on selling it at the right time and for the right price.
The aim isn’t to stop investing in your company. It’s to make sure the value of one asset isn’t carrying the full weight of your future.
Know your retirement number before your sale price
Before deciding what your business needs to sell for, work out what you need the proceeds to achieve.
According to the Pensions UK Retirement Living Standards, a single person now needs around £45,400 a year for a comfortable retirement lifestyle, while a two person household needs £62,700.
These aren’t savings targets. Your own requirements will depend on the life you want to lead.
Do you want to travel regularly? Help children onto the property ladder? Move home or abroad? Continue working because you enjoy it, rather than because you need the income?
Each decision changes the amount you’ll need.
Working backwards from the lifestyle you want allows you to ask a more useful question than simply, “What is my business worth?”
It allows you to ask: “Will that be enough?”
Build wealth beyond your business
For business owners, reinvesting in the company often comes naturally. New staff, equipment, technology and expansion can feel more pressing than putting money aside for a future that may still be decades away.
But concentrating most of your wealth in one company can leave your future finances heavily dependent on how that business performs.
Research from the Institute for Fiscal Studies found that more than three quarters of employees who consistently saved into a pension stopped doing so when they moved into self-employment. It shows how easily retirement savings can fall down the priority list once you start working for yourself.
Pensions, ISAs and diversified investments can help you build personal wealth alongside the value held in your company. Each comes with different rules, risks and tax considerations, but together they can reduce your reliance on a single future sale.
That can also give you more flexibility over when you exit. If you have other assets to support your lifestyle, you could look at other options, such as waiting until market conditions are better for a sale, or gradually reducing your involvement in the company. It may also allow you to negotiate without the pressure of a fixed deadline in your mind.
The goal is to make the eventual sale part of your retirement wealth rather than the whole of it.
Start preparing for your exit while you’re still growing
Leaving a business is rarely as simple as finding a buyer and agreeing a price.
Research from Shawbrook found that 41% of UK SME decision makers are considering exiting their business within the next five to 10 years.
Potential buyers generally want to see a company that can continue performing after its founder leaves. Strong management, documented processes, recurring revenues and a diverse customer base can all reduce dependence on one individual.
Waiting until you’re ready to retire can leave little time to address weaknesses that might affect the value or attractiveness of the company.
There is also more than one way to step away. Depending on your business and objectives, possibilities could include a third party sale, management buyout, employee ownership or family succession.
Exploring those options while you still have time gives you greater freedom to decide what matters most. That could be maximising the sale price, protecting jobs, keeping the company within your family or retaining some involvement after you step back.
Exit planning isn’t simply about pursuing the highest valuation. Starting early gives you more control over when you leave, who takes over and what happens to the company you’ve spent years building.
Plan for tax before you sell your business
The price you sell your business for isn’t necessarily the amount you’ll have available afterwards.
Under HMRC’s Business Asset Disposal Relief rules, qualifying gains on disposals made from 6 April 2026 are taxed at 18%, compared with 14% for qualifying disposals made between 6 April 2025 and 5 April 2026.
That makes tax an important part of your exit planning before a transaction is agreed.
The structure and timing of a sale, how you invest the proceeds and how you plan to pass wealth to future generations can all affect your wider financial position.
Bringing your accountant, solicitor and financial adviser into the conversation early can help you understand how your business exit fits with your long-term plans.
What does life after your business look like?
Building a successful company takes vision, discipline and patience. Deciding what comes after it deserves the same attention.
The question isn’t simply how much your business might sell for. It’s what you want that money to make possible. That could mean retiring completely, working less, travelling more, supporting your family or simply having greater freedom over how you spend your time.
The earlier you define that future, the more time you have to build the finances to support it.
Your business may be your greatest financial asset. It shouldn’t be your only retirement strategy.
Ready to think about what comes next?
Whether retirement is five years away or 20, Flying Colours Advice can help you understand how your business, pensions and investments could work together to support the future you want.
You can arrange a conversation with an adviser here: https://fcadvice.co.uk/book-an-appointment/
Please note:
This article is for general information only and does not constitute advice. The information is aimed at retail clients only.
All information is correct at the time of writing and is subject to change in the future.
The value of your investments (and any income from them) can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance. Investments should be considered over the longer term (minimum of 5 years) and should fit in with your overall risk profile and financial circumstances.
The Financial Conduct Authority does not regulate estate planning, tax planning, trusts, or Will writing. Note that life insurance plans typically have no cash in value at any time and cover will cease at the end of the term. If premiums stop, then cover will lapse. Cover is subject to terms and conditions and may have exclusions. Definitions of illnesses vary from product provider and will be explained within the policy documentation.
Planning horizons are illustrative and will vary based on individual health, circumstances, and life expectancy.