We understand how hectic running a small business can be. Many small business owners place as much as possible on their own shoulders, usually due to habit or lack of help. Unfortunately, retirement always comes faster than you expect and if you aren’t careful, you’ll wake up one day to realize that you have not put enough time into planning your own finances.
Fortunately, there are ways to mitigate this potential disaster by following a few simple steps.
Delegate Roles and Tasks
Starting out, many small businesses don’t have the ability to hire sufficient help to fill out important roles. But as your business grows, it’s important to look for opportunities to bring on new talent. Not only does it allow you to take a bit of a breather and work on what is important to you (such as building and maintaining client relationships), but it could also be crucial to overall growth by allowing others to do what they do best.
It’s important to note that in order to continue this, you’ll need to provide good incentives to retain key employees. A pitfall for many small businesses is that they are constantly looking to fill important positions, but many don’t consider what it takes to retain that talent. Remember, losing and onboarding for key roles is costly – you’ll lose productivity and have to pay the costs of recruiting as well.
Your Own Retirement Plan
While most employers provide a 401(k) for both themselves and their employees, there is far more that you could be doing for yourself to ensure you’re on track financially. Look into making profit share contributions and incorporating a defined benefit plan. By taking advantage of these options, business owners could defer a significant amount of income for their retirement.
Ensure That Your Exit Plan Isn’t Dependent on a Strong Economy
Not enough business owners are prepared for the potential of economic downturn when it comes time to sell their business. While there is certainly a chance that your business will sell for what you want, it’s a dangerous assumption that leads many business owners to rely too much of their retirement on the potential worth in a good market. Owners must account for the fact that there may be no prospective buyers when they’re ready or for economic downturns that restrict access to credit that potential buyers would need to complete the sale. It’s important to diversify your retirement beyond the sale of the business in order to avoid this potential disaster.
If you’re a small business owner that feels overwhelmed thinking about retirement or would like further insight to steps you can take, feel free to contact us at Total Wealth Planning. We adhere to the Fiduciary Standard of Care, meaning that we are required by law to work in your best interests.