The Canberra Business Podcast
A podcast about all things Canberra Business.
The Canberra Business Podcast
A Small Business Owner’s Plan For A Confident Exit
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If your retirement plan is “sell the business one day,” you’re not alone, but you might be taking more risk than you realise. We sit down with Craig Phillips from Phillips Wealth Partners, a Canberra-based financial planning firm, to unpack how small business owners can build a clear business exit strategy without guessing their way through the biggest financial decision of their lives. We dig into why business owners often have lower superannuation balances than employees, and how irregular income and an all-in bet on one illiquid asset can leave you exposed.
Craig explains sequencing risk in plain language: the market might not cooperate when you want to sell, even if you’ve picked a perfect date on the calendar. From there we get practical, starting with a retirement spending plan and a target income number, then stress testing what happens if the business sells for less than expected. We also talk business valuation and why an independent view from a business broker can be a game changer, even if you are years away from selling.
We cover superannuation strategy beyond “set and forget,” including reviewing investments, fees, and performance, plus what changing rules like payday super mean for compliance and cash flow. We finish with the tax side of exiting, including the reality of capital gains tax and why small business CGT concessions can depend on timing, structure, and early planning. If you want more choice and control over your retirement timeline, this conversation lays out the checklist and the team you need around you.
Subscribe for more practical Canberra business insights, share this with a business owner who keeps putting retirement off, and leave a review with the one question you want answered about exiting your business.
Welcome And Guest Introduction
SPEAKER_01Hello and welcome to the Canberra Business Podcast. I'm Greg Hartford, your host from the Canberra Business Chamber, and I'm delighted to be joined today by Craig Phillips from Phillips Wealth Partners. Craig, welcome to the podcast.
What A Holistic Planner Does
SPEAKER_00Thanks, Greg. Great to be here.
SPEAKER_01Now tell me a little bit about Phillips Wealth Partners before we kick off. What is it that you do?
SPEAKER_00So Phillips Wealth Partners is a Canberra-based financial planning organisation. We've been operating for about 10 years here, and we really work across a number of client sectors, but particularly small business owners, retirement village, and aged care advice is also one of our specialities.
SPEAKER_01Okay, so it's an interesting mix.
SPEAKER_00It is. Now I've been around since the early 90s, so it has sort of borne through a bit of life experience, and you've really got to work in the areas that you actually enjoy, and there's a great deal of satisfaction with working not only with uh business owners but those who are at the other end of the retirement spectrum who are trying to navigate the inevitable complexities that come with you know downsizing or moving into aged care and how that you know interplays with all of their all of their investments and finances.
SPEAKER_01Yeah. And and and what's the scope of what you do for people? So it's advice about how to manage things.
SPEAKER_00Look, it's pretty broad. The the the the starting point is really we're in holistic firm. So what that really means is we take we really want to understand exactly you know what's important to the family, what are their goals, you know, and we do that on a big whiteboard, you know, what is their financial situation, and what are the what are the optimal strategies to meet those goals? And and that's really fine-tuned over the last sort of 25 years of you know, really meeting with people and just understanding well what is it that they want to do and how can we best help?
Why Business Owners Retire Differently
SPEAKER_01So let's talk about retirement planning for small business owners because many of the people listening into this podcast will be small business owners. Uh, why is it different for someone who runs or owns a small business compared to someone who's an employee?
SPEAKER_00Yeah, look, really interesting. So for many small business owners, the business effectively becomes their retirement plan. It's not the whole plan. And as we know, small business owners make up a significant part of the Australian economy, and importantly the workforce. But unlike employees, sole traders and say partnerships, they don't actually have to pay themselves superannuation. Uh, even company owners who only receive the compulsory superannuation, you know, the 12%, uh, that you find that if their focus has been on the business, that their balances might be a little bit lower towards the end of their you know their working career. And that can be from a lot of factors, you know, they've had uh irregular income, and a large portion of their wealth is really tied up in that one illiquid asset, which is you know the business itself. Um there's also something that we talk about called sequencing risk. Now it sounds like a bit of a fancy term, but just imagine that you really wanted to sell your business at a certain time, and it really wasn't the right time for that business through all different factors. Look, think at think right now, think if you're a service station owner now and you had no fuel. So you might want to have decided that look, April 2026, that's when I'm going to retire. And of course, we're now living in a very different world, so that the the the value of the your business that you think might not be there.
SPEAKER_01Yeah. And that's a really challenging um point because of course the world is changing so fast and there's so many unknowns. It's kind of ever since COVID, really, we've we've seen this succession of things which has impacted uh the business world in ways that people weren't necessarily thinking about. Um so how do you navigate that?
SPEAKER_00Well, the really the the starting point for exiting the business or or trying to you know ride out those uncertainties is planning, early planning. So ideally, the best time to think plan about exiting your business is when you begin, but look obviously in reality that just doesn't happen. This is my third business, and and the focus really at the beginning is you know uh making it work, getting it off the ground, making a profit. Retirement is the last, last thing. Um but if we're thinking in an ideal world, it's really three to ten years out. And why that's important is that this window gives the business owner uh time to improve the value of the business. Uh my favourite cleaning up the financials. The accountant's always really happy about making sure that the you know the zero or the MOB files look look as they should. Uh, reduce your dependence in the business. And it takes it a little bit longer, but you can't just do that overnight. So you need time, and critically, there's a whole bunch of tax concessions that require, as I said, these long lead times. So it's giving yourself plenty of time to actually get that right.
SPEAKER_01And that assumes, of course, that you know when you're planning to retire. Um does it does does that mean as a business owner you've really got to have be quite structured in terms of your thinking and and and have a goal in mind?
SPEAKER_00Look, look, absolutely, and the there's a couple of age-related concessions. So it's one of the only times of my life I've been happy to be over 55 where that those sort of concessions that sit in the background really do should play into the thinking about well, when am I going to retire? And you know, what are those um uh what are those important milestones? So I'll give you a bit of an example. A recent client we've been working with, they the first step they took was to think out five years. We said, okay, when's your ideal retirement age? And it was X. So the first step they took was really just to get advice. And so we got together, got their account, and they came to see me and we mapped out what is what's the ideal retirement look like? So again to really think about those numbers, and that could be what what sort of income do you need in retirement? What debts do you have that you need to pay off? Um, what big things you might want to do, like cars or holidays or even you know gifting to children. And and finally, how does this your shareholding, if you're not the only shareholder in the business, how does that look? So, yeah, you've really got to give yourself plenty of time.
Set Goals And Stress Test
SPEAKER_01So, what's what's the first practical step that a business owner should take?
SPEAKER_00Well, I think the first step is trying to think about your personal retirement planning as as separate from the business. You know, this means getting really clear on your you know your lifestyle retirement goals, and we talked about earlier. How much income do you actually want? The other thing you can do is look at the assets that are outside of your business, you know, like super innovation, shares, cash, um, you know, there could even be some inheritance coming through, and really stress testing. But what does retirement look like if the business sells for a certain price? But most importantly, what say it it sells for a lot less than what's expected? So it's really that stress testing and really trying to separate out, okay, I've got this business asset, but I want to retire. What are all those assets going to be that are going to form part of my retirement?
SPEAKER_01Do you think small business owners sometimes are a bit optimistic about the value of their businesses? What do you see at a practical level as people sort of cash up and get ready?
SPEAKER_00Look, look, absolutely, and I can use our own business, for example. A few years ago we engaged a broker just to have a look at, well, what is the, you know, what do they think the value is and what are the gaps? And we were not shocked, it was more of like, oh, okay, that's a really good idea because that's what someone else thinks. Uh it is a it is definitely where we've seen some poor outcomes where business owners haven't really done that sort of homework or due diligence to see what is the business worth. So that can really affect retirement outcomes. If there's a mismatch between what they think the value, something they've worked, you know, potentially the vast majority of their life building, there's a whole bunch of emotion in there, but it's like, well, in reality, the market says this. And that could be for all you know, all different reasons, all different businesses.
SPEAKER_01And that's a really tough message for people, right?
Get A Real Business Valuation
SPEAKER_00Very difficult because you're, you know, if you're a cafe owner, or it really doesn't matter what business, whether you're in real estate or financial planning, you've put your 70, 80 hours a week into it, and you think, oh no, that's worth worth this. But it's really, I guess it comes down to the boring numbers, crunching it with an accountant or probably a business broker as well, saying, Well, what does what does the outside world think about your business?
SPEAKER_01All right, so let's talk a little bit about superannuation. How how has the law changed around compulsory super for business owners?
SPEAKER_00So look, there's a couple of changes, and and some of them are a little bit misunderstood. So, first of all, we we touched on this earlier, so sole traders and partnerships, just as a recap, they don't have to pay themselves superannuation. And there are many business structures like that. And even company directors and owner managers are generally only required to pay, whether paying themselves a salary or a you know a director's fee, they've only got to pay the 12%. That's recently increased. And what we've found is that the ATO has really cracked down or really increased its focus on the compliance of you know the super contributions. So look in in the past, I know that you you really only had to pay the superannuation every quarter. Now that's changed, and you need to pay that super uh basically in the pay rant cycle. So for us, for example, it's easy, I'll use an example, uh, everyone gets paid fortnightly, that's when the super contributions have to be made. And that's sort of that that's definitely uh can be a bit of a structure. So getting knowing actually when you have to pay yourself really does matter now.
SPEAKER_01Yeah, and the ATO um presumably then could be um looking pretty closely at business owners themselves to make sure that they're receiving their superannuation payments at the same time as as employees.
SPEAKER_00Look, it's early days, but absolutely um look, I'm not an expert in how the how the ATO's compliance works, but y definitely over the the last couple of years the ATO has resourced up and um making sure that probably importantly that the employees are being paid on time because there's a there's probably a vast trove of you know uh uh poor results where business owners haven't paid their employees. So that's probably the driver. But as the as a working director, well you're an employee too. So it's sort of you know it is important.
Payday Super And ATO Pressure
SPEAKER_01Yeah, and those payday superchanges come into effect on the first of July this year, and there's plenty of information on the Canberra Business Chamber website if anyone needs more info on that.
SPEAKER_00Fantastic. And and our accountant actually sort of gave us uh the uh the reminder several months ago, just so we got we were getting into the good habit, and it's actually been quite good because we would leave it, you know, maybe not for a quarter, but it builds up, you know. Oh yeah, that's I've got to pay super, but now it's I guess it sort of makes sense, really.
SPEAKER_01Yeah. So um why why is superannuation still critical for business owners as they're getting close to retirement? Just about building that nested gap, is it?
SPEAKER_00So superannuation is still a really tax-effective uh solution for you know for all Australians. There's lots of concessions that are available, and we you know we probably need another hour to go through all those different ones, but it remember it's actually uh not an investments or tax structure, and it's a very good one. So it's really making sure that you're clear on what are all the available uh opportunities to keep building up that superannuation regardless of your balance. And the second thing I'll say about super is it's actually not the you know, not so much the structure, it's actually it's important to know what's actually underneath that driving the return, so the assets. So we always you know say to clients, look, let's have a look at actually, you know, where's your money invested? You know, is it suitable? What are the fees like, what are the performance? So it's not it's the opposite to set and forget, sort of you know, embrace it and making sure you're aware of look, how can that, how can that, how can this be an important part of our retirement planning? It's obviously not the only one, but it's an important one.
SPEAKER_01Now we touched on business valuations earlier and the mismatch that sometimes can arise between um the views of a business owner about how much their business is worth and and uh what the market's saying. Um obviously it's really important to obtain a business valuation. Have you got any advice uh around that? Why why is it so important and who do you talk to?
Super Is Not Set And Forget
SPEAKER_00So, look, absolutely, look, you can't really, in our view, you can't plan your retirement properly if you don't know what your business is worth. Um so a professional valuation just at a high level sets that realistic expectations and and identifies gaps. And it doesn't actually cost anything to get a business broker in and engage them, find one that you you like and one that understands your industry so that they can sort of start to at least put a figure on what they think the business is worth. Because remember, we talked about retirement planning. Well, if you're gonna unrelease, sorry, unrealize that asset as part of your retirement, you've really got to know what it's worth. So a business broker can be an exceptionally important point. As I mentioned earlier, a few years ago, we did this as an exercise to see, well, we think it's worth X. What does a completely independent third party think? And they highlighted some really important areas. We went, oh, okay, let's work on that. We weren't looking to sell the business, but we just wanted to go through that exercise. I did know someone who was a true business broker who specialise in our industry, so they had years of experience of saying, oh, you look, you know, look at this, look at that. And it was that was really helpful.
SPEAKER_01Is it a bit like selling a house? Often you get real estate agents who um will tell you your house is is worth perhaps a bit more than it than it than it comes out to be at the end of the day.
Working With Brokers And Advisors
SPEAKER_00I actually think it's the opposite. Uh in our experience, it was well, we had a figure in mind based on a really interesting a formula which I thought was the industry standard, and they had a completely, not completely different, but they had a they had a view of well, if I'm representing the owner, which the business brokers can do both, they are going to look at this this formula. Like, well, that gave a completely different figure. I was like, oh, okay. So look, I've I don't have vast experience in business brokers, but the one uh one or two that I've spoken to, they they generally want to give you the the most, you know, not the worst case, but they want to give you some some real numbers. They're not going to be saying, yeah, it's worth this. Um because when the accountants inevitably get involved uh and the lawyers, it'll be well, you just want to avoid all of that misinformation, you know.
SPEAKER_01All right. Um now tax planning is obviously an important um thing for any any business owner. Um do you think it's it's more important to be planning your tax repairs uh when you're looking to exit a business?
Tax Risk And CGT Concessions
SPEAKER_00Look, it's absolutely critical. Now we don't expect small business owners or any business owners to be tax experts, but the the bottom line is that your business, if you think, think of an example, if you think that your business might be worth a million dollars, okay, well, it doesn't matter what industry, then depending on how long you've own that business, the tax bill could be quite large. Like it could be 250,000. Okay, so which or whatever your marginal rate is. So it's around, it's it's thinking, well, how long have I had that had this business? And if this business had only been in place for say 10 years, there could be a nasty shock around, wow, I didn't, you know, I'm not getting a million dollars, I'm getting a figure substantially less. So it's just important to know that look, you don't need to be a tax expert, but if you're getting the right people around you, they will help talk you through the generous small business, you know, capital gains, tax concessions, you know, there's there's a whole bunch, there's 15-year exemptions, etc. So it's just knowing at a high level, look, the time uh when you want to exit is really important so that you're not getting that sort of, you know, that that bill shock as we might like to refer it to.
SPEAKER_01What are the biggest mistakes do you think that business owners make when it comes to planning their retirement and their exit from the business?
SPEAKER_00Okay, well, there's a couple, but really the the number one thing is you can't wing it. This is not something I think you can't can do on your own. So you might it if you're you know, not disencamping, but if your dream's to go on a cruise uh every year or so, then you really want to make sure that your business sale is going to be in order to really capture the true value. Uh the the egg the next sort of couple are you know don't leave it too late. Don't assume that it'll automatically sell. And I think we've definitely seen this from time to time where you have a you know that there's been a decision to actually sell, and it could be through poor health, uh rush decision, things like that, market conditions where they really want to sell it now, but that's you're not in control of that. So assuming that it will sell quickly and ignoring those uh super in tax strategies that we touched on earlier is really important so that you're really um you're not missing out on those and you're not going to underfund your retirement just because you didn't sort of um uh you know have that plan in place.
SPEAKER_01Um now you mentioned tax again, uh tax is obviously a critical issue, but there are some um capital gains tax concessions for small business owners, is that right? What what is it that people need to know and what should they understand?
SPEAKER_00Well, look, there's there's four of them, and I can spend an hour unpacking them for you, Greg, if you've got time. But look, the most important thing uh that you to understand is that there's this this whole time frame, okay. So the the four really are there's a 15-year exemption, okay, there's an active asset reduction, okay, so there's a few other things around your age, there's some roll-over relief. So it's really just making sure that you know how long you've had that business for and how close you're going to be to you know those those particular concessions. So it's really important because it can be, as I said earlier, it's one of the only times I've been happy to be over 55, because that's there there's some there's some rules around that and permanently retiring. So it's really important just to know so you don't have to be a tax expert, but the I guess the key takeaway with the all the tax components is that get your advice team around you, get a financial planner, get an accountant, and get a business broker, and the lawyer will come at the end, just so you're going to need that team, so you can't wing it, Rick can't.
SPEAKER_01Okay, so that advice, you reckon, is really important, and uh make sure you've got the whole team, not just not just one advisor.
SPEAKER_00You can't wing it, you really do need to invest that um that time. And there's there's something we refer to as you know working uh on the business as opposed to in the business, and that's a good example of making sure you're giving yourself the time to go, okay, who who can help me in my my objective? And the objective is to realise the most amount of money from my my business, but it doesn't matter what it is, because there's lots of things that can happen in a positive way.
The Biggest Exit Planning Mistakes
SPEAKER_01And that's of course a real challenge for many small business owners who who just don't have time to do everything that they need to do, and often uh the complaint is well, I'm too busy doing my day job and then managing compliance rather than working on the business. So um there's there's some challenges there perhaps for people who are time poor.
SPEAKER_00Very look, very relevant even in our in our world, and it it does take a lot of discipline to tips that we do. We block out our diary with time so that no one can be booked in for that time, and that gives us the headspace to think about whatever it is that we might be need to be doing, whether it's in relation to to this or or compliance. It's actually very rewarding. It's taken us a while now to give yourself that time because that you can't be sort of having your head say in a client folder and thinking about oh well, you know, what can we be doing in the business to reduce owner dependence? And that's it, that's probably the one that comes up a lot. Well, can I train somebody what's available? I know AI has been talked about a lot, but it's really about making sure there's you're not the risk, you know, you need to de-risk your business a bit. So just look it's a skill like you know, like like exercise needs to be practiced regularly.
SPEAKER_01Yeah, and and we've talked about owner dependence, or you've mentioned that a couple of times during our conversation here. Um, but that really just means having other people in the business who can run the business so they're not reliant on you, right?
Reduce Owner Dependence
SPEAKER_00100%. And and look, it's in all the textbooks about you know the that if you're uh if the business relies on you, then you've you know you've got a job, you haven't got a business, those sorts of things. But in reality, it's actually quite difficult to do, and it it comes down to what we've tried to do is make sure we're very clear on what the uh what are the what are the roles that we're actually doing that someone else could actually do. Making sure that you've got the right person and they've got the right attitude to go, oh okay, sure I can learn, I can learn that, because everything's a learned skill. And we've had a lot of success in the last 12 months of just starting to make sure that whoever's around us, doesn't matter what level they're at, that they're giving more responsibility. And it's been really positive because they they want a bit more work, they want a bit more responsibility, you just need to have to you know document what it is and trust that they're going to be able to do that. And I think business from a business owner that whole trust is difficult to hand over because it's your you know it doesn't matter what it is, whether you're ordering supplies or paying paying invoices, you just you want to get it right.
SPEAKER_01Absolutely. Um so look, if you're a small business owner listening to this, Craig, um what what would you be advising them to do? Right now, to be starting to think about exiting their business, even if that in fact isn't for another 10 years.
A Practical Exit Checklist
SPEAKER_00So the number one thing, Greg, is figure out how much money you're going to need in retirement. Okay, look, it's in a it's an important, it's a it may seem like a simple statement, but it's really important because that's kind of what it comes down to. Everybody's going to be different. You know, some people need a thousand a fortnight, two thousand a fortnight. Look, it doesn't matter what it is. We'd recommend doing a spending plan as if you're no longer working. Okay, so once again, it might not be perfect, and there are plenty of templates around to help you do that, but you need to incorporate things. So the business is sold, uh thinking ahead now, the business is sold, I need X amount of income. When I in retirement, when I've stopped working, what are my travel plans? Are we going to upgrade the cars? You know, maybe you know the petrol guzzler to the EV now or something like that. Uh, gifts to children, they're all the sort of typical things we see, uh, paying down debt, but that's sort of the the uh the key thing I'd say. Work, work, try and work out what that is. Because then you can look back, what am I paying myself now? Where are the sort of gaps? Do I need a hundred thousand a year, but I'm only paying myself 60 now? Well, there's that could be a disconnect, or it could of course be the other way. Um interesting exercise. There's a couple, there's sort of probably three more after that. So that's the first one. Then get the business valuation, get involved with a broker that knows your business. It may take some years of and confidence of them understanding your business and you trusting them. Review your super and personal investments. Remember trying, you know, they're they're sort of separate to your business, of course. And explore those realistic sale and and succession options. Get your coordinated advisory team around you. And that, once again, that may take a bit of time to see, you know, are the people around you gonna be the right people? It takes time, absolutely takes time. So treat it like so treat retirement exit like a business project. I know you don't need any more work to do, but that's sort of the that that's the sort of plan. So you're early, early and strategically trying to work out, you know, what are gonna be my best choices, and to give me the most uh choice and control, to give me that retirement outcome that I actually want.
SPEAKER_01So a business plan for business exit and retirement, essentially, is what you're saying.
Wrap Up And Follow
SPEAKER_00That's it, that's it, yeah. I know it sounds like more work, but it absolutely given given the the nature of how how our economy is structured, sort of re ref referencing the big things are trying to minimise tax and trying to grow your wealth. We know that super is one of the key ones, they're all sort of interplayed, and you need because of the the longer time frame sometimes needed for those, you just need to know about them earlier. You know, that's I guess that's the key thing. You're not sort of going, oh, worry about that later. I was like, well, actually, it's probably better to think about it and be comfortable, whatever level you're at, what you can do.
SPEAKER_01Yeah, excellent, some great advice there. Um, I'm Greg Harford, this is the Canberra Business Podcast, and I've been talking to Craig Phillips from Phillips Wealth Partners. Uh, Craig, thanks so much for joining us and sharing your your wisdom on um how to start your business plan for retirement.
SPEAKER_00Absolute pleasure, Greg. Thank you.
SPEAKER_01Thanks very much. Um, this is the Canberra Business Podcast. Don't forget to follow us on your favourite podcast platforms for future episodes. We'll catch you next time.