Tag Archive for 'Retirement'

How will you leave your small business the last time?

In this week's video I bring attention to your retirement plan or lack thereof.

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How will you leave your small business the last time?

Every small business founder gets to decide when they will start their small business. But when and how they leave the business is much less in their control.

There is no comprehensive research that breaks down the different ways small business owners divest of their businesses. But I have spent decades working with and observing the small business sector and, based on that experience, here are my thoughts and a few stats applied to responses we received to this online poll question: What will be the most likely exit scenario from your business when the time comes?

Almost one-third of our respondents said “I expect to sell my business to a new owner.” Sadly, this expectation level doesn’t match reality. The business brokerage industry reports that the success rate for selling a small business is approximately 20%. That means one in five of those who want to sell, will actually be sold. But more small businesses would be viable candidates for buyers if they operated with more with professional systems, practices, and recordkeeping instead of like a lemonade stand where they buy stuff and sell stuff and hope things work out.

Fourteen percent of our sample said, “I plan to convey my business to family members.” The historical experience for family business continuity to first generation is that 30% will do so. If our respondents are representative, there are several contemporary forces that could be causing this declining ownership transfer response. But it looks like business owners who have dreams of a family dynasty should be less presumptuous about that possibility in the future.

Only six percent of our folks said, “I will probably just lock up one day and not come back.” Unfortunately, like those who expect to sell their businesses, this number is probably not reflective of reality. When all small businesses are taken into consideration, from sole proprietors to those with more critical mass, most will simply turn the lights out one last time.

Our largest group, 49%, said, “I probably won’t retire, I’ll just go out feet first.” This response option was intended to be a little dark humor in two directions: 1) for those who believe they will have to work until they die; and 2) for those (like me) who love their work so much they don’t intend to retire. In any generation, this group and the one above will make up more than two-thirds of all small business divestitures.

One thing is certain about the relationship with your small business: One day in the future will be the last in your business.

Are you making plans for that last day?

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Check out my latest segment from The Small Business Advocate Show® linked below. I answer the question, What will happen to your business the day after you leave for the last time?

How will you leave your business for the last time?

Check out more of Jim’s great content HERE!

Take this week’s poll HERE!

Watch Jim’s videos HERE!

SBA Poll: How will you retire?

The Question:
What will be the most likely exit (retirement) scenario from your business when the time comes?

31% - I expect to sell my business to a new owner.

14% - I plan to sell (or convey) my business to family members.

6%- I will probably just lock up one day and not come back.

50% - Since I probably won’t retire, I’ll just go out feet first.

My Comments
These responses are not too far out of line with what I think is the reality for most small businesses. How do they stack up to your own expectations?

I’m going to have more to say about this, with some industry statistics, in an upcoming Feature Article. Stay tuned and thanks for participating.

Check out more of Jim’s great content HERE!

Take this week’s poll HERE!

Watch Jim’s videos HERE!

Video-The truth about small business retirement plans

In this week’s video I list the top 3 reasons why small business owners don’t fund a retirement plan.

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Take this week’s poll HERE!

Watch Jim’s videos HERE!

The truth about small business retirement plans

One of the most intuitive ways to think about the experience of small business owners as they start, run and grow their businesses is to compare it to raising a teenager.

A small business is like a teenager in two ways: 1) You always love it, but you don’t always like it;and 2) it always has its hand out for more money. And never is the second example truer than when you should be funding a retirement plan separate from future expectations from company assets.

As in the past, we recently polled small business owners again about retirement planning with this question: “Will you contribute to a qualified retirement plan this year?” We learned that 42% of our respondents are funding a plan, but the other 58% either aren’t able to fund their plan or don’t have one. By the way, these percentages have not improved since the last survey.

There are three reasons why small business owners don’t fund a retirement plan:

  1. The business never achieves the financial critical mass necessary for the owner to carve out the income to fund a plan. This is true for too many small businesses.
  2. They convince themselves that the business will provide for them in retirement, which is handy when you’re trying to justify paying the business first. Sometimes this works out, but sadly, most of the time it doesn’t.
  3. They never get started budgeting for a retirement contribution.

There are many ways the federal government hinders small businesses, but providing pre-tax retirement programs is not one of them. Indeed, there are several qualified plans that allow a small business owner to provide for their own retirement with tax-deferred contributions. Plus several include setting employees up on the same plan for their benefit while helping you attract better employees and keep them.

Here’s a partial list of prominent plans that cover most small businesses: The traditional Individual Retirement Account (IRA) is about to turn 40. The Simplified Employee Pension (SEP) and the Savings Incentive Match Plan for Employees (SIMPLE) both include employee participation, as does the traditional 401k.

Be sure to check with a qualified retirement advisor to see which one is best for you. Also, IRS.gov has extensive resources that will educate you.

You might sell your business for a lot of money one day, but just in case, take advantage of one of the tax-deferred retirement plans.

Make the commitment; budget for and start funding a retirement plan this year.

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This week on The Small Business Advocate Show® I reveal even more challenges that small business owners face when planning for retirement. Click the link below to listen to the segment.


Three reasons small business owners don’t plan for retirement

Check out more of Jim’s great content HERE!

Take this week’s poll HERE!

Watch Jim’s videos HERE!

SBA Poll: To Fund or Not to Fund

The Question:
Will you fund a contribution to a qualified retirement plan that’s deductible on you 2012 tax return?

24% - I have funded an IRA for the 2012 tax year

18% - I have, or will contribute to, a 401K, Simple Plan, SEP, etc.

15% - I have established a plan, but can’t fund it for the 2012 tax year

42% - I don’t have a qualified plan, nor can I fund one right now

My Comments:
In past years we’ve polled small business owners about their retirement funding ability, as we did again last week with this question: “Will you fund a contribution to a qualified retirement plan that’s deductible on your 2012 tax return?” As you can see, unfortunately more than half of small business owners are not able to fund a retirement plan outside of the business.

In next week’s Feature Article, I’m going to have more to say about this and reveal some of the ways the government encourages and actually contributes to retirement planning. Stay tuned.

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Check out my recent interviews on The Small Business Advocate® Show with John Graves about small business retirement tools and the Baby Boomer generation?

What are the best small business retirement tools?

Are Baby Boomers really good savers?

Check out more of Jim’s great content HERE!

Take this week’s poll HERE!

Watch Jim’s videos HERE!




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