Five Retirement Planning Tips for Business owners

The life of small business owners revolve around their business and their passionate involvement in it often leaves them preoccupied and casual about planning for the future  According to most small business owners, their business is their retirement plan.

In a survey conducted by Manta, it was revealed that more than one-third of small business owners do not have retirement plans whereas another wealth survey by the BMO concluded that the 75% of business owners who are trying to plan their retirement have only $100,000 or less saved for it.

Five Retirement Planning Tips for Business owners

How should retirement be planned?

“Planning is bringing the future into the present so that you could do something about it now” – Alan Lakein

The first thing to clearly understand is that your business is not your retirement plan. Small business owners can work on several strategies to enable a smooth retirement.  The most feasible and easy tips adopted by the entrepreneurs could include:

Plan on future living expenses

Planning for retirement can begin by some simple calculations. The calculations should be about the future living expenses of the business owners when they are no longer working. The questions they need to answer are how much they will need to live comfortably and how will they meet that requirement when they retire? Will they have saved enough until then?

When planning your retirement Plan on future living expenses

Engage the skills of a financial planner

Financial planners are proficient at understanding the financial situation of a business and draw up a plan accordingly. By engaging the services of a financial advisor, small business owners can formulate plans for their present as well as their future.

Invest in retirement plans

The small business owner can begin by investing small chunks of money into retirement plans. The benefits are two-fold. One, it reduces tax burden for the present, and two it helps grow tax-deferred for future, until it’s time to retire.

Small business owners Should start investing money into retirement plans

Here are four simple and popular retirement plan types for business owners to start investing in:



3. Solo 401(k)

4. SIMPLE 401(k).

Diversify investment portfolio

Other than investing in the retirement plans, small business owners also have the option to invest funds in low-risk investment schemes such as investing in the stock or the bond markets. This shall not only diversify their investment portfolio but will also enable them to withdraw funds when the time is appropriate i.e. at the time of retirement.

Diversify investment to protect your retirement plan

Plan a business exit strategy

A well-planned business exit strategy can help small business owners to derive maximum remunerative returns from their businesses when it is time to retire or pass on the business as a legacy. Without a well-planned business exit strategy, the business owner may have sell their business short or make last-minute decisions that may not be as lucrative.

Small business owners should not procrastinate their retirement planning for it is only through their present efforts that they can safeguard their future. If you need professional assistance to start planning your retirement contact the experts at FFPCT and book a free consultation:
FFPCT Business Finance Consultants

Why to Keep your Business and Personal Finances Separate

A business despite being shaped and nurtured by the owner like its own baby has its own distinctive identity. The owner and the business cannot be considered one. But in cases of small businesses, important financial separations, being governed by the same person, are brushed off unnoticed. Personal and business finance become intertwined.

 Keep your Business and Personal Finances Separate

Record of income and expenditures is the factor which indicates the performance of the business and thus should be kept separate from personal financial records. The money line between the two should not be blurred otherwise it could create an unpleasant financial situation.

What could go wrong if your finances are intermixed?

Your business has its own identity and there are several reasons why their finances should not be interwoven with personal finances. If the thin line between them is crossed the consequences could be severe.

Risking personal assets

mixing finances can put business owner's personal assets at risk

If small business owners mix their finances, their personal assets could become prone to risks. An outsider may claim personal assets for business liability and the business owner may not be able to evade it.

Complicated tax dues

If personal and business finances are intermingled, the business owner may have difficulty in calculating their taxable income. This may result in complications and the owner may have to pay penalties, fines, or higher taxes that can otherwise be avoided.

Messed accounts

In certain cases, small business owners may assign personal assets under business assets to reap the benefits of depreciation and lower their tax liability. The case may be vice-versa also. This practice can be unhealthy for the business as the owner will never be able to apportion the assets separately.

An Unprofessional Approach

separate personal and business finances is a sign of a healthy financial practice and professionalism.

Clients, creditors and vendors hesitate to develop work relationships if they sense a lack of professionalism in the company Having separate personal and business finances is a sign of a healthy financial practice and professionalism. This gives assurance of the legitimacy and competence of the business allowing them to build a long term professional relationships.

Doubtful creditworthiness

When business cash and personal cash are not mixed, it is easier to manage the cash flow into the business and the creditworthiness of the business is more perspicuous. Since the financial investors can tell if both the finances are mixed up, credit agencies retreat in providing loans to businesses that do not have separate assets and liability checklist.  

 businesses need to have separate assets and liability checklist

Maneuvering techniques to keep the finances apart

  • Small business owners have to keep separate financial records for their business and their personal investments and expenditures.
  • The bank account for the business should be separate and so should the debit and credit cards, so that payments and deposits of both the accounts go into and from the appropriate account.
  • Drawing out a salary from the business account every month shall enable both the business account and the personal account to exhibit debit and credit accordingly.
  • Services of a skilled financial accountant are mandatory as they can help give the right accounting treatment, categorizing expenses and preparing clear books of accounts.

Small business owners often muddle up between the two finances.  They overlook that keeping separate accounts is rudimentary to success. To learn more about how you can keep your business and personal finances separate. Contact the experts at FFPCT here – FFPCT Business Finance Consultants and book a free consultation.

Best Exit Strategy Ideas for Small Business Owners

A business is started and established with an aim of continuance, but during the period when it is flourishing and growing there may be some unforeseen occurrences that can enforce its shutdown or the transference of its ownership to a third party. A business exit plan allows a business owner to sell his or her business to a 3rd party and reduce losses in case the business is failing to do well. It also lets them exit a successful business, and make a profit. A well-planned exit strategy works like a safety net and must be included in business financial planning.

Best Exit Strategy Ideas for Small Business Owners

Business Exit Strategy

An exit strategy is a simplified approach that is planned well in advance. The reasons for a business ceasing to exist may not always be because of failure or incompetence to carry it through. There may be other reasons for its dissolution such as health problems of the owner, their retirement, another thriving business offer or opportunity, urgent need to raise funds or lack of interest in the business.

Thus, in simple terms, the business exit strategy serves as a safety net for the entrepreneur when they seek to get returns from the business without working in it.

Planning business exit strategy works like a safety net for the entrepreneur

An Ideal Business Exit Strategy

A business exit strategy should not leave one chewing their nails or at their tethered edge with bouts of anxiety. On the contrary, it needs to make sure such a situation does not arise. Therefore, it’s vital that every aspect of the business is well thought out, including the exit plan. An ideal business exit strategy must enable the business owner to emerge with a win-win scenario.

What are the options at hand?

Out of an array of business exit strategies, we have listed down the most viable ones for small business owners. The best one depends on the business’s requirement and the reason for its exit.

list of business exit strategy options for small business owners

1. Informal buyout

Under this option, the business ownership is transferred to a family member, friend or an existing employee. This kind of selling is a friendly closure with easier terms and conditions. It can be passed on to an existing family member as a legacy or the share of the owner can be taken over by a partner.

2. An ‘On sale’ signboard

The business can be sold off to one of the competitors, a larger company or to an interested investor. This can help the business procure a good market price. But this kind of sale is not feasible when the owner decides to sell immediately owing to contingency as it may not fetch fair returns.

3. Empty out slowly

The owner can drain out the business year after year by drawing cash and assets from the business at intervals.  This strategy takes the business through a slow and gradual exit.

happy business owner with an exit plan

For small business owners, planning for an exit strategy may not be as easy as it appears on papers for there is an array of emotions attached to their business. It implies that a day may come when they may no longer be at the decision makers. But a skillfully created business exit strategy can protect your future and that of your family and employees.

Do you need advise on how to best plan an exit strategy for your business? Book a free consultation with the experts at FFPCT here – FFPCT Business Finance Consultants