Are you an entrepreneur? Are you bothered about life after retirement? If YES, here are the best retirement plan options and tips for small business owners. Life is such that requires that after a hard work, there has to be a time when one has to relax and not work actively. This is one of the reason why all over the world, retirement is a necessity. Retirement is one aspect of life that is certain no matter the kind of business, job or profession that you involved in.
In all the countries of the world, different professions under government control set a retirement age for civil servants. So also in the private sector there is a benchmark as it relates to working lifespan of an employee; the age limit that an employee is expected to retire.
Table of Content
- Why Do You Need a Retirement Plan as a Small Business Owner?
- Who Prepares the Retirement Plan?
- Irregular Inflow of Cash
- Inability to Attract and Retain Experienced and Competent Employees (Assembling the Right Team)
- The Risk of the Business Closing Shop Unexpectedly
- Inability to Compete with Major Players in Same Industry
- The challenge of Recruiting a Reliable Successor
- Start Making Plans and Saving for Retirement from the First Day of Starting Your Business
- Hire the Services of an Experienced Financial Advisor
- Put Succession Plan in Place
- Join Investment Club
- Make Plans to Own a Private Property
- Make Plans to be involved in a Charity
- Register in a Good Gym
- Make Plans to Pursue Your Hobbies
Why Do You Need a Retirement Plan as a Small Business Owner?
The fact that you run your own business- whether it is small or not does not in any you immune from getting to a stage where you are expected to retire. It is a fact that running a business or working for an organization- whether in the private sector or in the public sector requires both physical and mental energy.
Come to think of it, no individual has the capacity to discharge the same energy at an older age in life. A 60 or 70 years old man could possibly not compete with a 30 or 40 year old man, as far as physical and mental energy is concerned. This goes to show that the energy level of humans drop as one progresses in age, hence the saying ‘Make hay while the sun shine’.
So, if you run your own small business, then you need to put plans in place for retirement – retirement plan. People who run small businesses are not like their counterparts in the government or with corporations who can afford to pay their employees retirement benefits and monthly pensions in most cases.
Who Prepares the Retirement Plan?
As a small business owner, it is your sole responsibility to plan for your retirement. This means that you just have to sacrifice for life after business. Although most people hire the services of retirement consultants to help them handle this aspect of their life, but you would still need to look inward and come up with creative ways that will help you maximize your life when you retire from active business or when you become incapacitated to run your business.
Challenges Small Business Owners Face That Re-emphasize the Need for a Retirement Plan
There isn’t any small business owner who is free from challenges. This is because there are teething stages in business. First and foremost, it is important to establish that as a small business owner, there are over a dozen more challenges that you are expected to face. These are challenges that can affect the execution of your retirement plans.
Here are some of the challenges that a small business owner is likely going to face whilst making plans for retirement;
Irregular Inflow of Cash
No doubt it is common to find small businesses struggling to secure regular inflow of cash from their services or products offering, little wonder most of the businesses are still considered small. The truth is that most business that are classified small will not remain small if they have steady inflow of cash.
Steady inflow of cash will enable the owner of a small business explore ways to expand and grow the business from being small to becoming a medium scale enterprise or a corporation. The challenge here is that, if a business is experiencing irregular inflow of cash, the business may likely struggle to pay salary talk less of putting in place retirement plan for the business owner. Small businesses are known to always strive for survival.
Inability to Attract and Retain Experienced and Competent Employees (Assembling the Right Team)
If you run a small business and are able to secure the services of a well experienced staff; someone with an intimidating CV, then you are amongst the very few small business owners that is lucky. The truth is that an applicant who is not well experienced can afford to work for a small business , but as soon as they garner the required years of experience and expertise, they tend to move on to bigger corporations / organizations.
As a result of this trend, small business owners are always ruffled when a trusted staff that understands the business decides to leave. Sometimes money and freedom to be creative at work is not enough to tie down this category of employees. In essence, it will be difficult balancing between building / growing the business and making plans for retirement.
The Risk of the Business Closing Shop Unexpectedly
Another major challenge that small business owners face is the risk of the business closing shop unexpectedly. There are loads of reasons why a small business can close shop unexpectedly. It could be as a result of court cases, it could be as a result of the owner of the facility refusing to allow you continue your business in his / or facility, it could be as a result of the demise of a key member of your workforce or terminal illness of the owner of the business.
The bottom line is that as a small business owner, you might not have the whole money to quickly enforce contingency plans when the unexpected happens. That is why you must ensure that you make plans for retirement or for unforeseen circumstances.
Inability to Compete with Major Players in Same Industry
If there is one major challenge that is common with small businesses, it is their inability to favorably compete with major player in the same industry where they operate. The truth is that the survival of small businesses depends on their creativity and their ability to secure their own target market especially in situations where they have to compete with well established brands in the same industry where they operate.
It is a fact that bigger corporations can afford to leverage on prices to push out small businesses from the market. In essence, it will be difficult for small business owners who are struggling to survive to make plans for retirement.
The challenge of Recruiting a Reliable Successor
Lastly, another challenge that is unique to small business owners is their ability to get the right successor for their business. Of course it is the practice for small business owners to recruit a member of their family especially their children to succeed them in the business.
That alone does not guarantee that the business will eventually become successful or maintain the momentum gathered by the founder of the business. It is one thing to have a member of your family on ground to take over the business from you when you retire, it is another thing for him or her to buy into your vision and be willing to drive the business to success.
Surefire Tips for Effective and Successful Retirement Planning for Small Business Owners
Having established some of the challenges that small business owner’s face in their quest to build their business and in making plans for retirement, it is still not enough for you as a small business owner not to work against all odds to make plans for your retirement.
The truth is that, if you don’t make plans for your retirement which is inevitable, then you will have yourself to blame when the time comes. You don’t have to run a highly successfully business or organization before you make plans for your retirement.
Here are some of the surefire tips that will help you strike a balance between building / growing your small business and making plans for retirement.
Start Making Plans and Saving for Retirement from the First Day of Starting Your Business
There is a saying that goes thus “those who fail to plan actually make plans to fail”; this means your inability to make plans for your retirement is itself a plan to have a boring and struggling retirement. It is no doubt that it can be pretty overwhelming starting and running a small business, but that should not be a reason why you should not start planning for your retirement.
As a matter of fact, the wisest thing to do as a business man or woman is to start making plans and saving for your retirement from the very first day you open your door for business. You don’t necessarily need to start saving big for your retirement from the first day.
The most important thing to do is ensure that you start keeping aside a percentage of your income in a separate account specifically meant for investment and your retirement. As a matter of fact, as soon as you get your first check from a business deal, you should set aside a percentage for your retirement.
If you are disciplined enough to follow through your plans of saving for your retirement from the first day you started your business, then you can be sure that it would get to a level where you wouldn’t have to struggle or feel financially constrained whenever you set aside a portion of your monthly income for your retirement. This is because it would be a natural thing for you to do.
Hire the Services of an Experienced Financial Advisor
If you would not want to entrust the repairs and maintenance of your automobile to an inexperienced mechanic, why would you want to do same with your financial retirement plan? You should ensure that you choose a Financial Adviser that has good years of experience in his or her field. Choose a financial advisor that has over time proved his or her worth in the industry. You could go about this by asking folks who have walked this path to be sure you get the very best.
The first thing to look out for when shopping for a financial advisor for your retirement is the qualification of the person. A professional and competent Financial Adviser should make it a duty to obtain the required certification for practicing in his/her industry. Ensure that you choose a financial planner that is certified.
Whilst some financial advisors operate without this certification, the most ideal thing is to get someone that has taken the pain to go through the 2 years process of becoming a certified Financial Advisor. In addition to that, you can also consider those that are Registered Investment Advisor (RIA), Accredited Investment Fiduciary (AIF) and a Chartered Retirement Planning Counselor (CRPC).
Much more than ensuring that you choose a financial advisor that you can afford, be sure that the payment plan is good. You should also make it a point of duty to choose the one that has a compensations structure that suits you. Before you sign any contract with a Financial Advisor, make sure you request to see their compensation structure. Do not make a choice until you are satisfied with how you will get your returns on investment when you are retired.
Put Succession Plan in Place
It is one thing to build a successful business, and it is entirely a different kettle of fish for you to retire and see the business grow. The reality is that a large percentage of small businesses fail when the founder retires due to the wrong choice of succession or lack of effective succession plans.
So part of the plans that you should put in place when making plans for retirement is to ensure that you already have in mind the best time to retire from business and also have a good succession program in place as soon as possible; you should begin to groom a successor to take over the business from you when you retire. A successor that can fully buy into your vision and business ideals.
When sourcing for a successor, most people restrict their choice to only their family members. That is good, but the truth is that sometimes you need to look beyond your family members. This is so because if you end up choosing a family member as your successor and the person is not really interested in the business or perhaps if the person doesn’t have what it takes to successfully run a business, the possibility of the business dying in the hands of the person can’t be ruled out.
The bottom line is that, you have got to keep the options of a successor open so that you won’t make the mistake of handing over a business that you work hard to build to someone who is not passionate about the line of business.
The reality still boils down to the fact that, if you get it right with a successor for your business, you can retire peacefully and enjoy your retirement without having to interfere in the running of the business. If you are confident that there is someone who can successfully run your business in your absence, then you don’t need to struggle to save up for retirement because you can still continue to earn from the business.
Join Investment Club
Aside from running a business and saving up for retirement, another important plan that you should put in place so as to enjoy your retirement is to have various investment portfolios; investment portfolios that wouldn’t take your time. It might be challenging managing investment portfolios as a business person which is why you should look for investment clubs to join.
Investment club take away the stress of looking for the right retirement investment to make from off your shoulder. Investment club helps you spread the risks of investment and you will be able to leverage on the experience of members of your investment club.
If you are able to get it right with investments, you can be rest assured that when you are retired, your money will be working for you. You can enjoy your retirement whilst you continue to earn money from your various investment portfolios. You will quite agree that one of the reasons why people don’t enjoy their retirement or why people find it difficult to retire from active work or business is financial security.
Without steady inflow of money, you can hardly enjoy your retirement- which is why you must put plans in place for your money to continue to work for you when you are retired and that is exactly what good investments can do for you.
Make Plans to Own a Private Property
As a small business owner it is very important that you work towards owning a property for your business and also a property for your retirement home. If you run your business from a rented property, you can be booted out from the facility whenever the owner decided to use the property for personal use and that of course can lead to a major setback for your business.
So as a small business owner who is looking towards retiring someday, the best thing you can do for yourself and your business is to ensure that you set goals of owning a property for your business. When you own a property for your business, it makes it easier for you to set long term plans which involve retirement plans as well.
It might be difficult, but ensure that you do not retire into a rented property. This means that you have got to make sure you retire into a home that you own. If you retire into a rented apartment, you are likely not going to enjoy your retirement especially if you don’t have steady inflow of cash during your retirement. If you don’t have idea of how to go about acquiring a property for your business and your retirement home, you can talk to a realtor or a mortgage banker and they will advise you accordingly.
Make Plans to be involved in a Charity
You can have the whole money and a luxurious retirement home and still not enjoy your retirement plan. In essence, when you are making plans to secure steady flow of income when you are retired and a place to live when you are retired, you should also make plans to be involved in any activity that will give you joy and fulfillment; a platform that will help you contribute your quota towards making our world a better place.
As such, if you are making plans for retirement, you should also make plans to be actively involved in a charity organization. Much more than contributing your money, you should also give your time or serve as a volunteer from time to time.
You could choose to coach a local / community soccer team, you could choose to become a counselor or a mentor to young people in your community and you could choose to become a fundraiser for charity causes et al. The bottom line is that you should make plans to get involved and make good use of your retirement.
Come to think of it, if you don’t make plans to spend quality time doing some activities during your retirement, you will likely go into a boring retirement lifestyle.
Register in a Good Gym
It is very important to keep fit all the time; this is because of the health benefits that you stand to gain at all times. Health they say is wealth and the fact that you are retired does not mean that you should not keep fit. As a matter of fact, the best time you need to keep fit is during your retirement.
During retirement as a business owner the likelihood of your daily activities reducing by more than half is none negotiable. You won’t have to wakeup very early in the morning to go to work, or be on the road in search of clients or in pursuit of a business deal. You won’t have to attend series of business meetings or trainings et al. All those activities are enough to help you stay fit.
Hence, your best bet to stay fit and stay healthy during retirement is to register in a gym; a place close to your home where you can easily jog to every morning and evening to exercise. With the aid of gym instructors, you can be well guided to engage in exercises that are suitable for you.
In essence, your retirement plan wouldn’t be complete if you don’t have plans in place to help you stay healthy and fit. It won’t really cost you a fortune to register in a gym, but you can be rest assured that the benefits that you will get from actively making use of a gym can’t be quantified. You stand the chance of improving both your mental and physical health. As a matter of fact, you stand the chance of prolonging your lifespan.
Make Plans to Pursue Your Hobbies
Aside from the steady flow of income during retirement, another reason why people find it difficult to retire from their businesses is the fear of retiring into a boring lifestyle. Most business people are so into their businesses that they can hardly survive outside the business; their life is wrapped around the business.
Never wrap your life around only businesses- make room to carry out those hobby activities that makes you happy and can make you enjoy and relish life the more. This is so that much more than having a retirement plan, it prepares you to be mentally ready.
Therefore, as the owner of a small business, if you are making plans to retire someday, it is very important to include plans to pursue your hobbies. It could be playing golf, it could be playing tennis, it could be traveling and it could be virtually any activity as long as it is for fun and it gives you pleasure.
Of course you might not have the time to visit all the places that you would love to visit when you are actively running your business. With good retirement plan in place, you can go to all the places you dream of going to; you can spend the better part of your time on vacation travelling from one country to another and from one tourist site to another tourist site.
Over and above, if you are small business owner, you don’t need to work all your life pursuing money. With a good business plan in place, you can comfortably retire early than anticipated and still enjoy your retirement. All you need to do to get the assurance and security you need as regards retirement is to follow all the surefire tips listed up. You can retire and still enjoy the quality of life that you dream of only if you can discipline yourself to follow thorough your retirement plan.
Finally, it pays to start from the very scratch to plan for one’s retirement. It makes it worth the while when it is premeditated than when one chances into it or when one has to rush the processes involved. If it is something that might prove difficult then you can speak with business consultants who will be able to advise you really rightly.