If you are like most business owners, you know your business inside and out. You get the job done, day after day, racing around without missing a beat. You feel like you can do it all, and you usually do. In your daily rush, it is easy to put off crucial, long-term financial planning that can help you and your business. Before you know it, you are five or ten years down the road with key financial planning areas still unaddressed. If the unexpected occurs, your business can change in an instant.
Have you considered these four critical but often overlooked planning areas?
Only 3% of start-up entrepreneurs intend to purchase an existing business1
When you think of succession planning, thoughts of selling your business at retirement, transferring it to a child or selling out to a business partner might come to mind. What if something unexpected happens before then such as divorce, disability or death of a business partner? Unfortunately, many business owners have not put a plan in place that will allow them to pass the business on to a son, daughter or valued employee, while also providing for their spouse. In fact, only 35% of small business owners have a formal succession plan2 and only 30% of small businesses survive the transition to a second generation.1
What’s your exit strategy?
1. “Don’t Let a Weak Succession Plan Become a Wealth Destroyer.” National Underwriter, 2007.
2. LIMRA Small Business Owners, 2009.
About one-third of small business owners have no pension or retirement savings and no idea how they will retire3
If you are like most business owners, you tend to put all your money back into your business. But relying on your business to be your sole source of retirement income is like putting all your eggs in one basket. That’s why it’s especially important for you to have a plan that addresses your needs. Did you know the tax savings from a company-sponsored retirement plan can fund your personal contribution, or that contributions on behalf of your employees may be tax deductible?
Can you retire when you're ready?
3. “Small Business Owners are Unprepared for Retirement” American College, 2012.
Cost for replacing a key employee can reach an average of 150% - 200% of their salary.4
It is important to recognize and reward vital staff members who help you keep the business running smoothly. This allows you more freedom to focus on business growth. Losing a key employee to a competitor can mean a significant financial loss for your business, which can impact your lifestyle and even force you to delay your retirement. You can offer your best employees a benefits package designed to motivate, reward and retain them for the long term.
What happens if your most important person leaves?
4. Bliss & Associates Inc., Wayne, NJ Consulting Firm, 2012.
Only about 49% of small business owners have an estate plan5
You may think estate planning is just for the wealthy, but having an estate plan is especially important for business owners. Without proper planning, your death could result in a significant tax liability due in just a few months after your passing. Outstanding debt and other personal costs would need to be addressed. Not having enough funds to cover these expenses may cause the sale of business assets at pennies on the dollar. Don’t let your legacy and everything you have worked so hard to build be lost.
What will you leave behind?
5. LIMRA Business Owners Need More Advice on Their Finances, 2005.
Let us help you build a solid plan to protect your business from costly mistakes.