By definition, entrepreneurs devote many of their financial resources to their businesses. But as a business owner, you may need to invest in more than inventory and payroll to help you achieve the future you’ve envisioned.
Here are some investments you might want to consider:
retirement account – Depending on the nature of your business and the number of 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’ll have many investment options: stocks, bonds, mutual funds, etc. And if you “cash in” on your retirement plan, you can even create 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 may want to concentrate your investment options in 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.
Property – Your physical space is a key part of the success of your business. Therefore, you may want to invest some time in weighing 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 could free you from worrying about premature rent increases.
Disaster Protection – If a fire or weather-related disaster hit your business, would you be prepared? It is important that you create a disaster recovery plan, which may include business interruption insurance to pay for your operating costs if you are forced to close for a period of time.
Emergency savings – While a disaster protection plan with adequate insurance can help keep your business afloat, it’s unlikely to cover other types of emergency needs, such as a large medical bill or an expensive repair to your home . For these unexpected costs, you may want to create an emergency fund that covers at least a few months of living expenses, with the money kept in a liquid account. Without that emergency fund, you may be forced to dip into your 401(k), IRA, or other long-term investment vehicle.
You’ll also want to invest time and energy in creating a business succession plan. Will you keep the business in your family? Sell it to outsiders or a key employee? If you come, will you do it all at once or over time? Clearly, the answers to these types of questions will make a huge difference in your ultimate financial security.
Finally, invest in help: enlist the services of a financial advisor and business planning professional, so you can make the decisions that work best for your business and you.
Your business can be a lifelong endeavor, so make sure you invest whatever it takes to make a lifetime profit.
Jennifer Barrett (AAMS) is a local financial advisor at Edward Jones.
225-612-0413 | jennifer.barrett@edwardjones.com
Edward Jones. SIPC member.
Edward Jones, its employees and financial advisors are not estate planners and cannot provide tax or legal advice. You should consult your estate planning attorney or qualified tax advisor regarding your situation.
This article was written by Edward Jones for your local Edward Jones Financial Advisor.
