Special to the Financial Independence Hub
Small business owners typically spend their days juggling a huge variety of tasks, whether they have a team around to help them or not. From managing accounts and serving customers to handling marketing and sales and developing new products or services, there are many priorities which compete for attention. As a result, it can be tough for entrepreneurs to find the time and the energy to think about their future, particularly when it comes to retirement savings.
However, that doesn’t mean that it should keep being put off until later. If you own your own business, it’s important that you don’t end up at retirement age without enough savings to see you through. If you need to take care of your future, read on for some steps you can follow today to tackle retirement planning.
Know Your Goals
When it comes to retirement for small business owners, one of the first things entrepreneurs should think about is their long-term goals. Whether you want to retire in ultimate style one day or just want a basic amount of cashflow to see out your days with a simple life, it’s important to be clear on what your exact goals are for the future.
Apart from working out how much money you will need to retire in the manner you wish, you should also have goals about when you want to retire, and how you want to go about doing so. For example, would you prefer to sell your business, hand it down to a family member, friend, or colleague, or simply close it up when you’re ready to retire? Or perhaps you would prefer to sell just your share of the business to a business partner? Your goals for the future will determine how you prepare for your retirement, so you need to know them well in advance.
Make a Plan
Once you have your goals clear in your mind, the next step is to make a plan about how you will go about achieving them. It pays to make long-term plans for the future of your small business, as well as to make a plan about things such as where you will live when you retire, what other investments or savings you will derive income from, and at what pace you will divulge assets for cashflow.
The majority of small business owners generally need to utilize other savings, on top of what they make out of their business. This means you should plan out all your investments for the coming years in advance. Be aware that your current age contributes significantly to how aggressive your savings plan must be, so should be factored in to your plans.
Keep in mind that although you may be tempted to put all of your venture’s profits back into your small business over coming years, if it will be your main retirement nest egg, you should also save as much cash now as you can so that you have other funds available. As a result, you may want to give yourself a raise now, and put a plan in place for the salary you earn to keep incrementally rising over the years.
Have an Exit Strategy and Succession Plan
Another thing to do now is create an exit strategy from your small business, even if you’re not planning on retiring for many years yet. Putting a succession plan in place will help to take off much of the stress when you’re about to retire, and can make the process a lot more seamless.
If you want the business to keep on running after you have left it, you will need to consider who may be a potential successor that you can hand over the reins to. You may want to test out a variety of candidates in the years leading up to your retirement, particularly if you’re thinking of naming a family member or close friend as successor. It is also a good idea to train a potential successor well in advance of your retirement so that you don’t have to put off leaving the business if they’re not ready in time.
In addition, it helps to create a specific transition plan that can be followed when you retire, no matter whether you will be selling the business or passing it on to a loved one. You should establish a timeline that sets out how and when the succession plan will be implemented, and then have this checked over by your advisors. They can make sure that there won’t be any taxation or legal problems with the transition you have proposed.
Cher Zevala is a content coordinator who assists in contributing quality articles on various topics. In her free time she also enjoys hiking, traveling and getting to know the world around her. Cher has built up many strong relationships over the years within the blogging community and loves sharing her useful tips with others.