If you own a small business and you haven’t thought about your retirement plan you’ll want to think about it now!
Whether a new business or a rooted industry to retire the key is to start with the end in mind!
A majority of small business owners reluctantly admit they do not have a plan in place. Many assume their business IS their plan and when it’s time to sell they will be well compensated. On the other hand, some owners feel like they will never be able to stop working. They need the income or the real fear of possibly outliving any retirement monies they do save! Many business owners hold a primary position in their company, but what happens if you’re not there? Can your company run without you? So where do you even begin when looking to create a well laid out retirement plan?
You start at the end.
You look first to how much money you will need to be able to retire. This means living off the money you have saved and nothing else. This means evaluating about how many years’ worth of income will you need to account for: how many lives will the money be supporting, and what happens God forbid you become ill and need to retire early? With all that in mind – can you afford to retire?
Create a business strategy that will allow you to slowly step down from your owner responsibilities.
This is something that needs to be agreed upon years ahead of time! Whether your intent is to sell your organization, pass it to your children, or step down to silent partner there needs to be an intricate strategy in place so that the company stays strong and can run without you being at the helm.
A few things to keep in mind when creating your succession plans would be to comb through your company finances and make sure all your legal documents are up to date, decrease your company expenses, and polish your financial statements so a clear understanding of your company’s strength can be showcased to potential buyers. Consider paying off any outstanding business loans so new owners have autonomy to come in with a clean slate. Know the true market value of your business before you sell, and look for potential buyers early on so you don’t get caught selling in desperation and leaving potential dollars on the table. Sadly, most business owners can even tell you a true market value of their business.
Ensuring employee retention is also an area you will want to address.
Try to create a positive work environment by aligning those in leadership positions to the company vision and how you wish to leave things run for the future. Building strong employee benefit packages such as generous vacation offerings and retirement planning services can offer tremendous value to your employees. Consider opening your doors to small business insurance or health care options and help your employees with their retirement savings by setting up a Simple IRA, SEP IRA, SOLO 401k or SIMPLE 401k. (Employ your advisor the assist in making the right decision for your company) These benefits will show how much you value them.
Finally, get that ending retirement number and work backwards.
Plan out how much money you need to pay yourself in salary to be able to reach your savings goal. Create your retirement plan as early as possible and put as much as you can aside! Use the resources around you such as your local small business administration. Also, setup a team with an attorney, and financial advisor to help your goals. It won’t happen overnight, but ensuring you can afford to retire and have enough funds to compensate for the unexpected is invaluable and an absolutely attainable goal for your business if you get started NOW.