How safe is your own future?

Small business owners are putting their own personal finances at risk by not giving their own financial arrangements the same care and attention they lavish on their business.

According to accountancy firm Kingston Smith, 93% of entrepreneurs have failed to review their personal finances in the wake of recent changes to the pensions regime while 85% have failed to seek advice following a landmark ruling in the House of Lords that affects the payouts made to ex-partners in divorce cases involving wealthy people.

Even more worryingly, the survey suggests that over half (54%) of entrepreneurs have no pension plans in place in the belief that their business will provide them with a lucrative retirement. Sixty percent expect a retirement income of at least £50,000 a year, the poll added.

This is despite the fact that 16% of entrepreneurs expect to make nothing from the eventual sale of their business and 33% are failing to generate sufficient long-term value from their company to finance their retirement. Only 39% of entrepreneurs expect to become millionaires when they eventually sell up.

The poll also revealed that under half of entrepreneurs review their finances on a regular basis while 29% have failed to do so at all in the last 12 months.

“Entrepreneurs may feel that by running their own businesses they are taking hold of their own destiny, but their failure to plan adequately for the future could seriously undermine their prospects of profiting from their hard work,” said Andrew Shaw, a partner at Kingston Smith.

“While it is tempting for entrepreneurs to let day-to-day business priorities come first or plough every penny back into the business in the belief that it will be their pension, this is a high risk strategy,” he added. “Putting all of your eggs into one basket greatly increases the risk that you won’t have sufficient resources to live the life you want to after you exit your current business.”

Most entrepreneurs (56%) intend to spend more time with their family once they have sold up, while a similar number plan to spend quality time abroad. More than three in 10 (31%) plan to get involved in unpaid charity work while 24% would like to set up another business.