Business is all about numbers. From revenue, profit, and cash flow to expenses and salaries, running a business requires you to be on the ball with a whole host of key figures.

But in reality, only one number is of any real importance to you as a business owner: how much you’re going to need to live your desired lifestyle when you finally sell your business and retire.

After all, providing an income for you and your family in later life is exactly what running your business is really all about.

So, while all the other numbers might be important, how much you’ll need for your lifestyle is the one you really need to focus your energy on.

Here’s why.

Your future has a calculable figure

There are many unknowns with the future, and so it can feel like it’s almost impossible to work out how much you’re going to need.

Fortunately, there are plenty of assumptions and estimates you can make to give you a fairly accurate picture of what you’ll need.

Working out your goals and ambitions

Firstly, you’ll need to know your bigger goals for the future. So, take a moment to think about your ambitions for your retirement, and also what kind of lifestyle you’d like to live.

Whether that’s travelling to every corner of the world, regular holidays abroad skiing, or moving to a bigger home in the countryside, these goals will be personal to you.

There’s no right or wrong answer when thinking about these objectives; it’s simply a case of figuring out what matters to you.

So, start with what you want to do, and work out roughly how much you’ll need to spend to reach these targets.

Estimating the cost of your lifestyle

Next, to find this all-important number, consider the simpler, day-to-day things that you know you’ll need.

Think about the costs of your basic expenses, such as food and utilities. Then, add these to any leisure activities you envisage wanting in later life, including everything from gym memberships and home entertainment to your monthly restaurant budget.

In combination with your wider goals, these considerations can then be mathematically factored into your future plans, giving you an even more accurate picture of how much you’re going to need.

Finding a figure

Ultimately, the point of this exercise is to come away with a figure that you can use to build your retirement plans on.

For example, let’s imagine that you do all these calculations and come up with a target income of £50,000 a year. Assume you’re going to sell your business and retire at age 60, and then live to around age 90 – a period of 30 years.

In total, that means you’ll need £1.5 million to be able to afford the kind of lifestyle you want.

Bear in mind that this figure doesn’t take inflation into account, which would likely mean you’ll need a lot more to keep up with the rising cost of living over the 30-year period.

Implementing strategies to ensure you reach your number

One of the biggest benefits of having this number in mind is that it gives you time to make changes if you think that you’re currently not quite on track to achieve it.

Thankfully, that’s the point of doing this kind of planning: so you can start thinking about implementing strategies that put you on the path towards your number if things don’t quite add up.

There are various ways you can consider improving your financial plan to achieve this. For example, you might:

– Change how much you spend and save

– Design an investment strategy with this figure in mind

– Increase your pension contributions.

Whatever you ultimately decide, make sure your choices are appropriate and tailored to the lifestyle you’d ultimately like to live.

Knowing what you don’t need

As strange as it may sound, figuring out your number can also inform how much you don’t need from your business.

Think of it this way. Imagine that you have an independent individual value your business, who estimates your company to be worth around £1.8 million.

Let’s assume that your number is just £1.5 million, as in the example above. So why would you purposefully target an additional £300,000 when you don’t actually need it?

Rather than holding out for what you think the business is worth, knowing how much you really need means you can be content with a lower price, safe in the knowledge that it will still be sufficient in providing you with the lifestyle you want.

In fact, a higher price might even discourage a potential buyer, all for the sake of money that won’t even make a significant contribution to your ambitions or standard of living.

The power of knowing your number is also the choice of knowing what you don’t need.

Want to know your number? Work with us

There are so many variables at play when calculating your number that it can be difficult to do so yourself, especially when you’re trying to run your business at the same time.

So, if you’d like to work with a professional who’s helped countless business owners to find their figure and secure their futures, please get in touch with us at Cordiner Wealth.

Email or call 0113 262 1242 to find out how we could help you.

Please note

This article is for information only. Please do not act based on anything you might read in this article. All contents are based on our understanding of HMRC legislation, which is subject to change.

A pension is a long-term investment. The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Your pension income could also be affected by the interest rates at the time you take your benefits.

The value of your investment 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.