Small Business Private Equity Can Improve Your Retirement Outlook Without Selling

Posted on March 3rd, 2022
Small Business Private Equity

The most valuable retirement assets that many small business owners have are actually their business itself. Retirement may seem far-off and in the future for some. At the same time, others may be wondering if it’s already too late to start planning. It’s never too early to prepare for your retirement, and those latecomers should be assured they can always take steps to improve their trajectories.

For those looking to develop or collaborate on financial strategies, working with a well-chosen small business private equity investment firm can help mitigate some of the more challenging risks involved with planning for retirement. From liability to diversification and inflation to longevity, a private equity partner can help make sure you stay on track.

Planning Your Retirement

The value placed on a business will change due to industry trends and economic cycles. It will also vary based on how it performs over time. Optimizing their retirement plan is key for entrepreneurs who don’t want to miss out on growth opportunities. Why not take advantage of a private equity firm’s business solutions, knowledge, and resources? As a trusted financial partner, small business private equity can give business owners the ability to confidently make better decisions.

Owning your own business offers a lot of freedom, but it also comes with a significant amount of responsibility. For the more than 37 million small business owners in the United States, that’s especially true when it comes to planning for your retirement.

Challenges Involved

Solopreneurs and entrepreneurs busy dealing with the daily challenges of running a business often don’t think much about planning for retirement and have not taken time to prepare themselves for this next chapter in their life. They may even think they’ll be able to rely on Social Security benefits during their retirement. However, the average monthly Social Security benefit is $1,485.63 — not much more than a minimum-wage salary. It’s far from ideal and is nowhere near enough to support the kind of lifestyle that most retirees desire.

Unfortunately, small business owners and entrepreneurs do not have the luxury of employer-sponsored retirement plans. Instead, they must make planning for retirement a top priority. But planning for your retirement, and saving accordingly, is easier said than done, especially when 37% of business owners lack enough profits to save for retirement.

In addition, some small businesses that want to offer employee retirement plans have been unable to do so for the same reason. Suppose you’re going to get the maximum value from your business and start saving for your retirement. In that case, it is critical to understand the benefits of partnering with small business private equity.

Retirement Strategy

If you haven’t even begun to consider your retirement plan, you aren’t alone. According to the U.S. Federal Reserve Report on the Economic Well-Being of U.S. Households, 25 percent of non-retired adults have no retirement savings at all. And of those that do have some, only 36 percent consider their retirement savings to be on track.

When it comes down to it, the biggest mistake a small business owner can make is simply failing to invest in a retirement strategy at all. And, it may seem like a good idea to put all your earnings back into growing your business; But, you need to look into other investment vehicles. Otherwise, you may never be able to reach your retirement goals.

Here we examine how small business private equity can allow for a flexible and reliable long-term opportunity for owners to provide retirement options for themselves and their employees without a complete sale.

Retirement Funding Options for Small Business Owners

Standard options for small business owners to fund a retirement plan include a variety of 401(k) and IRA accounts. But, again, if you lack the profits to add to these plans, they will be little help. Without investing money in retirement savings accounts, many owners just plan to sell their business to fund their retirement.

However, there are some great options for business owners to explore other options. Savvy business owners should consider a different type of retirement strategy – finding a constructive, long-term small business private equity partner.

It’s essential to realize the very real risks of banking on the sale of a business at the time of retirement, especially if the value of your business does not end up being what you anticipated. The US Small Business Administration estimates one-third of business owners over 50 have had a hard time just finding a buyer. As a result, many are unable to sell their businesses. With unrealistic ideas of what their business is worth, others end up selling for far less than they expected.

How is Partnering With a Small Business Private Equity Firm Different From Selling Your Business?

When most business owners hear about a private equity group, it’s likely they only think of entirely selling their business outright at the time they want to retire. However, partnering with small business private equity isn’t necessarily about a complete sale. Instead, it’s very much about helping those businesses continue to prosper, grow and increase in value.

Additionally, suppose you wait until right before your retirement. In that case, you are putting all of your eggs into one basket instead of setting aside funds for retirement plans over several years. The latter would have otherwise provided a strong financial footing for yourself and your family. Unfortunately, the National Retirement Risk Index (NRRI) recently reported that half of today’s non-retired adults are unprepared for retirement with no way to maintain their current living standards when they stop working.

You Can Start Saving for Retirement Now.

Here’s How Small Business Private Equity Helps:

When a small business private equity firm invests, it can allow owners to save for retirement. And, they can do so while also facilitating changes to increase overall revenue and growth. As a result, you can continue with business as usual and maintain an active role in your company as it continues to thrive. All the while, you can reap the benefits of its future growth and success.

If you are nearing retirement, you may be ready to take a few of your chips off the table. With an investment partner on your side, you’ll have access to their expertise and network. Moreover, this network includes various business areas, from leadership to sales to distribution. Small business private equity presents an excellent opportunity for owners, And that is to confidently step away from running parts of their business without a complete transfer of ownership.

Suppose you are many years away from retirement. In that case, this could also be an excellent time to partner with a small business private equity firm to help you get started with building financial security outside your business or for help with a succession plan. You likely have an interest in continuing to run your business just as you always have, and imagine with the added knowledge, connections, and experience offered by your investors. This also effectively allows you to unlock some of the capital you invested in your business and use it to invest in your retirement.

What is the key to successful retirement planning for small business owners?

Financial peace of mind begins with creating a plan to adapt to changing needs. This plan should also meet expanding financial goals and allow as much control over your business as you desire. Partnering with a small business private equity investor helps grow revenue to fund retirement, affording owners reassuring security and flexibility, knowing that they have a plan in place.

You might be ready to take a step back from operational control. Or, you might want to stay as involved as ever. On the other hand, you might be in a position where your company is struggling, and you need to improve cash flow and profits. Perhaps maybe you’re ready for a significant expansion, but don’t want to rely on your own assets to fund it. The great thing about the increased availability of small business private equity is that it brings value to any scenario and can help entrepreneurs prepare their personal finances for retirement.

Success is when opportunity meets preparation

Retirement planning may feel overwhelming for many owners, specifically those who often feel too busy running their companies to take time to even think about retirement. Yet, most owners know it takes planning ahead and preparation to run their business successfully. The same goes for retirement.

Fortunately, working with a small business private equity firm can provide owners with extra financial peace of mind about their future. It may not be the most obvious strategy for planning your retirement. But not only can private equity help you build your retirement plan, but it can also help you build your business. So, it doesn’t matter whether you are close to retiring or simply exploring your future options; It’s important to evaluate the best path to retirement for you, your family, and your business.

Concluding Thoughts

The steps involved in planning for retirement as a small business owner are certainly more complex, especially compared to those of typical retirement. But, understanding your options can make it less daunting. No matter what stage you plan for your retirement, it’s essential to consider if small business private equity may be the right option to help you meet your business goals and life dreams.

As the old Chinese proverb says, “The best time to plant a tree was 20 years ago. The second best time is right now.” So if you don’t want to be one of the 40% of retirement-aged Americans relying on Social Security income alone, then stop waiting and start planning.

For your business’s success and growth, start saving for your future retirement now.

Peter Daisyme

Peter Daisyme

Peter Daisyme is the co-founder of Palo Alto, California-based Hostt, specializing in helping businesses with hosting their website for free, for life. Previously he was the co-founder of Pixloo, a company that helped people sell their homes online, that was acquired in 2012.

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