By definition, business proprietors invest a significant portion of their financial resources in their organizations.
But as a business proprietor, you may need to invest in more than inventory and payroll to realize your vision for the future.
Here are some potential investments to consider:
- Retirement pension
You can choose from a number of tax-advantaged retirement plans, including an owner-only 401(k), a SEP-IRA, and a SIMPLE IRA, depending on the nature of your business and the number of your employees. By making consistent contributions to one of these accounts, you can avoid relying solely on the sale of your business to fund your retirement.
You will have many investment options to fund your 401(k) or other retirement plan, including securities, bonds, and mutual funds, among others. Moreover, if you “max out” your retirement plan, you may be able to construct a distinct investment portfolio.
To accomplish a level of diversification, you may wish to focus your investment choices on areas outside your industry. Diversification can help reduce the impact of market volatility on your portfolio, but it cannot guarantee profits or protect against market losses.
- Property
Your physical location is essential to the success of your enterprise. Therefore, you may wish to compare the advantages and disadvantages of renting versus owning.
Owning your building may require a substantial financial investment and may not be feasible, but it could liberate you from fretting about unexpected rent hikes.
- Disaster mitigation
Would you be ready if a fire or weather-related calamity struck your business?
It is essential that you create a disaster recovery plan, which may include business interruption insurance to cover your operational expenses if you are forced to close for an extended period of time.
- Emergency reserves
While a disaster protection plan with adequate insurance can help keep your business afloat, it is unlikely to cover other emergency requirements, such as a large medical expense or an expensive home repair.
For these unforeseen expenses, you may wish to establish an emergency fund with at least a few months’ worth of living expenses in a liquid account. Without such a fund, you may be forced to withdraw from your 401(k), IRA, or other long-term investment account.
You’ll also need to invest time and effort in the development of a business succession plan. Will the enterprise remain in the family? Sell it to the general public or a crucial employee?
If you choose to sell, will you do so all at once or gradually? Clearly, the responses to such queries will have a significant impact on your eventual financial security.
Ultimately, invest in aid
Engage the services of a financial advisor and business-planning expert so you can make the best decisions for your business and yourself.
Your business may very well be a lifelong endeavor; therefore, you should invest whatever is necessary to obtain lifetime benefits.
