Keep the Future in Mind when Building a Business – Source article – Building a Business is Like Being a Parent – U.S. Department of the Treasury. Internal Revenue Service.
Did you ever think that building a business is a lot like being a parent?
Your business begins in infancy, needing constant attention. You put your interests on the back burner while nurturing your company through its growth, hoping it will stand on its own one day. If all goes well, your legacy will carry on and take care of you financially.
The commitment of conceiving, nurturing, and growing your company to having the business take care of you in retirement is the purpose of succession planning.
Do you visualize your business continuing beyond your lifetime or reap your investment rewards by selling it?
Determining this is crucial to what you want for and from your business in the long term.
Which succession plan is right for you?
- Internal Succession Plan – Begin planning as soon as possible. You’ll want to choose and develop the skills of someone whose heart is invested in carrying on the business.
- Selling the Business – Start thinking about selling five years in advance to make sure your financial books are in order. Keep in mind the time it will take to put your business on the market, as well as the transitioning period.
- Selling a portion of the Business – This option involves selling 10-20 percent of your business shares to a potential successor, then selling more over time until the new owner owns a majority. By keeping some ownership, you will collect dividends to help fund your retirement.
- Ending the Business – In this case, you’ll need a cessation plan. In part, this includes collecting all accounts receivable, settling all debts, selling inventory, notifying employees and creditors, and filing final tax returns.
Retirement Savings Options
Being your own boss means providing for your retirement and being proactive in setting retirement money aside.
How do you begin?
Again, it is with the end in mind. Assuming that your business IS your retirement plan could be a very costly mistake.
To achieve substantial retirement savings through the ups and downs of your working life, plan to put aside 10 percent of your income in the early stages. During the middle phase, practice “burst savings” when, typically, your income is at its highest.
What would you need for financial comfort?
Determine how much you’ll need in savings if you want or need to stop working in the future. A financial advisor can help you develop a plan to meet your goals.
A financial advisor will discuss which retirement savings accounts are best for you, including a 401(k), SEP IRA, savings incentive match plan for employees (SIMPLE) IRA, or defined benefit plan.
Your Crescent Franchise Solutions advisor will help determine which plan is best for you, guide you through the process, and help you prepare for the future.
Schedule your free consultation today by calling (941) 923-3663 or filling out this convenient online form.
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