Retirement savings has to be part of the initial business plan….

Small businesses are usually started as a one person operation. A business plan is seldom put on paper; it usually is kept in the owner’s mind. An accounting system is a check book, with the goal of not being overdrawn.

I am an advocate of creating a working Strategic Focus Business and Marketing Plan for all businesses. It is never too late to develop this working, accountability and measurement tool. In this blog I want to focus on a necessary part of the plan that is often missing, and that is a retirement plan for the owner. Many businesses stay small, and in essence have created a “job” for the business founder.

Budgets are a must for a business. It’s not enough to cover the day to day operational expenses that only allow for survival. Two other items should be part of a business budget, a reserve account and a retirement account for the owner. If those two items are not covered then the business is not a viable business.

I suggest that you meet with a Certified Financial Planner or your CPA and determine, based upon your age, what amount has to be put aside into a retirement fund, every month. The second fund that has to build up is a reserve account. I recommend a minimum of six months operating capital which should include the owner’s salary. Building up and maintaining these two funds is just as important as paying your rent.

There are many ways to open a retirement account and I recommend that you visit with your financial planner and select the best one. Don’t put your savings in a bank account. If you do, you will use it for other purposes.  Select one of the retirement plans that you cannot withdraw your funds (without a penalty) until retirement.

My concern stems from the large number of small business owners who are nearing the age of retirement or are working past their desired age of retirement with no hope of surviving without working.

The best time to save money is when you have some……………..

Nick J. Petra CFP