Written

For

The

Australian

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Buying

a

business

for

retirement

-

is

it

a

good

idea?

Would you rather earn 1 per cent on a term deposit or 10-20 per cent buying a small business? For some retirees, that question isn't rhetorical — it's the entire investment thesis.

With term deposit yields sitting roughly 90 per cent below where they were 15 years ago, I'm seeing more retirees look beyond the traditional shares-and-property playbook. And one option gaining traction is buying a private business — often to be run by adult children or in-laws.

Speaking with Rad Benicky from CORE Business Brokers, the numbers stack up in an eye-catching way. A cafe generating $200,000 revenue with a 15 per cent margin, sold on a 1.5x multiple, can throw off a 10 per cent yearly return. Some online businesses push that to 20 per cent. Try getting that from a term deposit.

The family angle is what makes this strategy particularly interesting to me. Parents provide the capital, the kids run the operation and draw a wage, and there's a natural succession plan built in. It's a genuine win-win when the family dynamic and business acumen are both there.

But — and this is a big but — you're buying the future income of the business, not a guaranteed cashflow. Products fall out of favour. Clients leave. Competitors emerge. Due diligence isn't optional.

There's also the SMSF question. On paper, running a business inside super and enjoying tax-free returns in pension phase looks fantastic. In practice, Caxton Pang from Linton Advisory Group points out how easily the sole purpose test gets breached — even a family member pouring themselves a coffee could trip you up.

My take? For retirees with business nous, a decent risk appetite and ideally family willing to roll up their sleeves, buying a business can be a powerful income strategy. For everyone else, the risks probably outweigh the yield premium.