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By definition, business owners put a lot of financial resources into their enterprises. But as an owner, you need to invest in more than inventory and payroll to help achieve the future you envision.
Here are some investments you may want to consider:
- Retirement Account – Depending on the nature of your business and how many employees you have, you can choose from a variety of tax-advantaged retirement plans, such as an owner-only 401(k), a SEP-IRA and a SIMPLE IRA. By contributing regularly to one of these accounts, you can avoid relying entirely on the sale of your business to pay for your retirement years. To fund your 401(k) or other retirement plan, you have many investment options — stocks, bonds, mutual funds and more. And if you “max out” in your retirement plan, you may be able to build a separate investment portfolio. In any case, keep in mind that you are already putting a lot of money into your business, so, to achieve a level of diversification, you can focus your investment choices on areas outside of your industry. However, while diversification can help reduce the impact of market volatility on your portfolio, it cannot guarantee profits or protect against losses in a declining market.
- Assets – Your physical space is a key part of your business’s success. So, you may want to invest some time in comparing the pros and cons of renting versus owning. Of course, owning your building may require a large financial commitment, and it may not be feasible, but it can free you from the worry of untimely rent increases.
- Disaster Protection – If a fire or weather-related disaster should strike your business, are you prepared? It is important for you to have a disaster recovery plan that can include business interruption insurance to cover your operating costs if you are forced to close for a period of time.
- Emergency Savings – While a disaster protection plan with the right insurance can help keep your business afloat, it may not cover other types of emergency needs, such as major medical bills or expensive repairs to your home. For these unexpected costs, you can build an emergency fund that covers at least a few months of living expenses with money kept in a liquid account. Without such an emergency fund, you may be forced to dip into your 401(k), IRA or other long-term investment vehicle.
- You may also want to invest time and energy in creating a business succession plan. Do you keep the business in your family? Sell it to outsiders or key employees? If you sell, do you do it all at once or over time? Obviously, the answers to these types of questions will make a big difference in your ultimate financial security.
Finally, invest in help – enlist the services of a financial advisor and business-planning professional, so you’ll be able to make the decisions that work best for your business and you.
Your business may well be a lifelong endeavor – so make sure you invest in whatever you’re investing in to reap lifelong benefits.
THis article was written by Edward Jones for use by your local Edward Jones Financial Advisor. Donated by Rob Adams. 71 Main Street, North Adams, MA 01247, 413-664-9253.. Edward Jones, its employees and financial advisors cannot provide tax or legal advice. You should consult your attorney or qualified tax advisor regarding your situation. For more information, see THis article was written by Edward Jones for use by your local Edward Jones Financial Advisor. Donated by Rob Adams. 71 Main Street, North Adams, MA 01247, 413-664-9253.. Edward Jones, its employees and financial advisors cannot provide tax or legal advice. You should consult your attorney or qualified tax advisor regarding your situation. For more information visit www.edwardjones.com/rob-adams.