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5RETIREMENTMISTAKESSMALL-BUSINESSOWNERSMAKE

5/24/17 AndHowtoAvoidThem

Asabusinessowner,youfaceuniquechallengesandopportunitieswhenbuildingyourfinancialfuture.Thisspecialreportprovidesinsightsonmistakestoavoidandstepstotakeforbuildingtheretirementyoudesire—whilemanagingyourmyriadresponsibilities.

5RetirementMistakesSmallBusinessOwnersMake

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5RetirementMistakesA F I N A N C I A L G U I D E B O O K F O R S M A L L B U S I N E S S OWN E R S

I N T R O D U C T I O N

Small-businessownersareanessentialcomponentofkeepingAmerica’seconomychurning.IntheUnitedStates,smallbusinesseswith500orfeweremployeesmakeup99.7%ofcompaniesandarecollectivelyworthmorethan$10trillion.1Toooften,however,small-businessownersspendsomuchtimeandenergybuildingtheircompanies,theyneglecttheirpersonalfinancialfutures.Theymightconsidertheircompaniestobetheirretirementplans,butdon’tcreatethestructureorstrategynecessaryforturningfinancialsuccessintoameaningfulretirement.Withthisreport,ourgoalistohelpbusinessownersavoidcostlymistakesandconfidentlyplanfortheretirementtheydeserve.

5MistakesBusinessOwnersMake MistakeNo.1:NotCreatingaRetirementRoadMapBuilding,running,andgrowingacompanyistough.Businessownershavecountlessresponsibilities,andtoofewhoursintheday.Often,inthemidstoffulfillingyourprofessionalpriorities,youendupputtingyourpersonalfinanciallifeonthebackburner.Ifyouhavenotplannedforyourretirement,youarenotalone.Manyentrepreneursthinkgrowingabusinessisalltheyneedtoretire.However,simplyhavingabusinessdoesnotautomaticallymeanyouhavearetirementstrategyinplace.Withoutadocumentedroadmap—onethatgoesbeyondthehopetosellyourbusinessortopassittofamily—youcouldenduppushingbackyourabilitytoretire.Inonesurvey,28%ofrespondentssaidtheywoulddelayretirementiftheycouldnotselltheirbusinessesorreceivethemoneytheyneeded.3Delayingretirementisnotalwaysanoption,though.Lifeoftenbringssurprisesandchallenges,andyoucannotalwayscontrolwhenyouretire.In2016,55%ofpeoplewhoretiredearlydidsobecauseofchallenges,suchashealthproblemsordisability.4Tohelpensureyoucanexperienceretirementonyourterms—ratherthanreactingtowhatlifeorthebusinessworldthrowsyourway—youneedtoproactivelyaddresstheseitems…today.

Almost half of business owners don’t have retirement

strategies in place.2

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Whattodonow:• Defineyouridealretirement.Clarifywhenyouwanttoretireandwhatlifestyleyouhopetoenjoy.• Buildstrategiestoaddressyourretirement.Determinetheactionsyouneedtotaketofillthegaps

betweenyourcurrentassetsandtheincomeyouwillneedtosupportyourdesiredretirement.• Holdyourselfaccountable.Donotletthebusylifeofbusinessownershipkeepyoufromstayingon

tracktowardtheretirementyoudesire. MistakeNo.2:NotHavinganExitStrategy

Formanybusinessowners,theideaofsellingtheircompaniesfortopdollarorpassingthemdowntofuturegenerationsisaretirementdream.Manyentrepreneurs,though,arenotdoingtheworknecessarytoturnthisdreamintoareality.IntheUnitedStates,60%ofsmall-businessownersarebabyboomerswhoplantoretirein10to15years.However,only1in8hasabusinesssuccessionplan—regardlessofthecompany’ssuccess.6Infact,asurveyofbusinessownerswithmorethan$3millionofinvestableassetsfoundthat64%ofrespondentsages50andolderdidnothaveaformalsuccessionplan.7Nomatterhowlongyouwanttoworkandhowmuchyouloveyourbusiness,aclearexitstrategyisnecessarytohelpfosterthecompany’slongevityandpreserveyourfinancialhealth.Ifyouwanttobeabletoretirewhenandhowyouwouldlike—andhaveyourbusinesslastbeyondyourcareer—youneedanexitstrategyforaccomplishingthatgoal.Whattodonow:

• Defineyouridealexitstrategy.Doyouwanttosellyourbusiness?Passittothenextgeneration?Findanoutsidesuccessor?

• Determinetherealvalueofyourbusiness.Hireaqualifiedprofessionaltoprovideaclearvaluationofyourcompanyasitistoday.Dependingonhowfaryouarefromretirementorexiting,youmightneedtorevisitthisvaluationinthefuture.

• Createastrategy—andsticktoit.Yourexitstrategymightrequireyoutohirenewpeople,adjustyourservices,orimplementanumberofotherchanges.

MistakeNo.3:NotHavingSeparateRetirementSavingsTryingtobuildretirementsavingswhileyoufosteryourbusinesscanbechallenging.Withonlysomanydollarstogoaround,andanendlesslistofprofessionalexpenses,youmightratherreinvestinyourcompany.However,evenifyouarereadytosellyourbusinessatretirement,youneedtohavesavingsthatarecompletelyseparatefromyourbusiness.Therealityisthatsolelyrelyingonthevalueofyourbusinesstocarryyouintoretirementisariskyapproachthatcaneasilybackfire.Notonlycanindustrieschangeandcompaniesfalter,butonly20%of

Only 15% of US businesses survive to the 2nd

generation—and 5% to the 3rd generation.5

In one survey, only 32% of respondents ages 45 to 64 had saved more than $100,000 in

retirement accounts.8

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businesseslistedtosellactuallydo.9Wouldyouandyourfamilybeabletoenjoyacomfortableretirementwithoutyourcurrentincomeorprofitsfromsellingyourbusiness?Iftheanswerisno,nowisthetimetostartbuildingyoursavings.

Whattodonow:• Balanceyourpersonalandprofessionalfinances.Whendecidinghowtoinvestyouravailable

assetsorwhatsalarytodraw,makesureyoufocusonaddressingbothsidesofyourfinanciallife.

• Exploreavailableretirement-savingstools.FromSEPIRAsto401(k)sandbeyond,small-businessownershaveaccesstoavarietyofvehiclesforbuildingretirementsavings.

• Reviewyourbudget,andcreateadisciplinedsavingsapproach.Identifywaysyoumightbeabletotrimyourcurrentexpensesorsaveonyourtaxliabilities.Also,establishahabitofregularlycontributingtoyourpersonalretirementsavings.

MistakeNo.4:NotHavingSufficientLifeInsuranceCoverage

Mostpeoplearefamiliarwithlifeinsurance,buttherolethisproductplaysforsmall-businessownersoftenismorecomplexthanforthetypicalindividual.Ofcourse,sufficientlifeinsurancecanhelpprotectyourfamily’sfinancialsecurityifyouweretopassaway.Abusinessowner,though,couldhaveanextraliability:businesscollateral.Ifyoutakeoutloanstosupportyourbusinessandyoupassaway,yourfamilymembersareonthehookforthatdebt,whichcouldjeopardizetheirfinancialstanding.However,withtheprotectionoflifeinsurance,yourlovedonesarecovered.11Inaddition,lifeinsurancecanbeatoolforsupportingyourcompany’slongevity.12Luckily,thecoverageyouneedmightcostsignificantlylessthanyouexpectbecausepeopleoftenoverestimatethecostoflifeinsurance.Infact,themedianguessforthecostof$250,000termlifeinsurancewasmorethantwicetheactualprice.13*Guaranteedinterestratesarebasedontheclaims-payingabilityoftheunderlyinginsurancecompany.Additionalbenefitsandridersmayincreasethecostofthepremiumorreducetheinterestrateearned.Applicantsaresubjecttounderwriting,whichmayincludemedicalhistoryandcurrenthealth.Whattodonow:

• Analyzeyourcurrentlifeinsurancecoverage.Doyouhavetherighttools?Doyouhaveunrecognizedgaps?

• Addressyourfamily’slifeinsuranceneeds.Calculateyourtotaldebtsandexpensestofindtheamountyourfamilywouldneedifyouweretopassawayprematurely.

• Uncoveryourbusinesslifeinsuranceopportunities.Workwithaprofessionaltodeterminehowlifeinsurancemightbeabletohelpsupportbothyourbusinessneedsandyourretirementgoals.

Only 47% of small companies have any type of

business life insurance.10

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MistakeNo.5:NotHiringOutsideSupport

Runningasuccessfulsmallbusinessrequiresanumberofskills—fromdeliveringyourproductorservicetomanagingemployeesandgrowth.Accustomedtoshoulderingavastnumberofresponsibilities,manybusinessownersseemtoforgettheydonothavetogoitalone.Hiringoutsidehelpnotonlygivesyouaccesstoexperiencedprofessionalswhocanapplytheirexpertisetoyourspecificneeds,butitcanalsosaveyousignificanttime.Ina2016surveyofalmost1,700growth-orientedsmallbusinesses,almost60%expressedchallengeswithunderstandingandmanaginglawsandgovernmentregulations.15Theyspentanaverageof4hoursaweekjustdealingwithregulationandtaxcompliance.16So,businessownershavebothpersonalandprofessionalfinancialstrategyneedsontopofregulatoryandtaxburdens,thusincreasingtheirneedforprofessionalsupport.Unfortunately,36%ofentrepreneursseekadvicefromtheInternetinstead.17

Whattodonow:• Determinewhatprofessionalsupportyouneed.Youlikelyshouldconsiderhiringatax

professional,attorney,andfinancialrepresentative.Youruniquecircumstancesmightrequireadditionalsupport.

• Askyourprofessionalstoworktogether.Aligningyourfinancialliferequiresanunderstandingofitsmanyfacets.Makesureyoursupportteamhasaclearpictureofhowyourvariouspiecesintertwine.

• Embracethebenefitofoutsideexpertise.Yourfinancialrepresentativeandotherprofessionalsaretheretohelpsupportyourneedswithprofessionalguidance.Letthemprovidetheinsightyouneedandtaketheweightoffyourshoulders.

HowWeCanHelpLaunchingandgrowingasmallbusinessisachallenging,time-consumingendeavorthatisnotforthefaintofheart.Asexperiencedfinancialrepresentatives,weareheretohelpyouovercometheobstaclesthatbusinessownersoftenfaceandhelpyouseizetheopportunitiesbeforeyou.

Intimesofeconomicfluctuationsandchangingregulations,webelieveitiscriticaltoseekguidancefromafinancialrepresentative.Thetipsinthisreportareahelpfuloverviewofwhatyoumightneedtoaddressforyourownretirement,butyourcompleteanswersareasuniqueasyouare.Fromourexperience,small-businessownerswhorecognizeandavoidthesecommonmistakes—andtakeproactivestepstoplanforthefuture—arebetterabletoenjoythelivestheydesire.

Nearly three-quarters of business owners do not have

a dedicated financial representative or banker.14

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Weknowbalancingyourpersonalandprofessionalprioritiesistough.Weareheretoserveasaresourceforyouandyourfamily.Wearehappytodiscussyourcurrentfinancialsituationandfuturegoalswithafree,no-obligationconsultationatanytime.Ifyouhaveanyquestionsabouttheinformationyoureadorwouldliketodiscussyourspecificneeds,pleasecontactus.Wewouldbedelightedtospeakwithyou.

Sincerely,

GuidanceAdvisors

Footnotes,disclosures,andsources:SecuritiesandInvestmentAdvisoryServicesofferedthroughWoodburyFinancialServices,Inc.,memberFINRA,SIPC,andRegisteredInvestmentAdvisor.(865)637-2611.GuidanceAdvisors,Inc.andWoodburyFinancialServices,Inc.arenotaffiliatedentities.

Opinions,estimates,forecasts,andstatementsoffinancialmarkettrendsthatarebasedoncurrentmarketconditionsconstituteourjudgmentandaresubjecttochangewithoutnotice.

Thismaterialisforinformationpurposesonlyandisnotintendedasanofferorsolicitationwithrespecttothepurchaseorsaleofanysecurity.

Investinginvolvesrisk,includingthepotentiallossofprincipal.Noinvestmentstrategycanguaranteeaprofitorprotectagainstlossinperiodsofdecliningvalues.

Opinionsexpressedarenotintendedasinvestmentadviceortopredictfutureperformance.

Pastperformancedoesnotguaranteefutureresults.

Consultyourfinancialprofessionalbeforemakinganyinvestmentdecision.

NeitherthenamedrepresentativenorthenamedBrokerdealerorInvestmentAdvisorgivestaxorlegaladvice.

Opinionsexpressedaresubjecttochangewithoutnoticeandarenotintendedasinvestmentadviceortopredictfutureperformance. Allinformationisbelievedtobefromreliablesources;however,wemakenorepresentationastoitscompletenessoraccuracy.Pleaseconsultyourfinancialadvisorforfurtherinformation. ThesearetheviewsofPlatinumAdvisorMarketingStrategies,LLC,andnotnecessarilythoseofthenamedrepresentativeornamedbroker/dealer,andtheyshouldnotbeconstruedasinvestmentadvice.

1“17SmallBusinessStatisticsYouNeedtoBeWellAwareOf.”FunderaLedger.https://www.fundera.com/blog/small-business-statistics[AccessedFeb.24,2017]“BusinessOwner’sRetirementPlanning.”ESOPPlus.http://esopplus.com/business-owners-retirement-planning/[AccessedFeb.24,2017]2“NewSurveyFindsSmallBusinessOwnersUncertainaboutRetirementPlan,Finances.”TDBank.https://mediaroom.tdbank.com/2015-05-04-New-Survey-Finds-Small-Business-Owners-Uncertain-About-Retirement-Plan-Finances[AccessedFeb.24,2017]

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3“5RetirementPlanningTipsforSmallBusinessOwners.”Forbes.http://www.forbes.com/sites/nextavenue/2016/12/08/5-retirement-planning-tips-for-small-business-owners/#313cc3ad3f3f[AccessedFeb.24,2017]4“The2016RetirementConfidenceSurvey:WorkerConfidenceStable,RetireeConfidenceContinuestoIncrease.”EmployeeBenefitResearchInstitute.https://www.ebri.org/pdf/briefspdf/EBRI_IB_422.Mar16.RCS.pdf[AccessedFeb.24,2017]5“BusinessOwner’sRetirementPlanning.”ESOPPlus.http://esopplus.com/business-owners-retirement-planning/[AccessedFeb.24,2017] 6“BusinessOwner’sRetirementPlanning.”ESOPPlus.http://esopplus.com/business-owners-retirement-planning/[AccessedFeb.24,2017] 7“IFYOUDOTHIS,YOU'RESMARTERTHANMOSTMILLIONAIRES.”CNBC.COM.http://www.cnbc.com/2015/06/23/most-millionaire-business-owners-have-no-succession-plan.html[AccessedFeb.24,2017]8“5 Retirement Planning Tips for Small Business Owners.” Forbes. http://www.forbes.com/sites/nextavenue/2016/12/08/5-retirement-planning-tips-for-small-business-owners/#313cc3ad3f3f [Accessed Feb. 24, 2017] 9“IndustryStatisticsEveryBuyerShouldKnow.”BizBuySell.https://www.bizbuysell.com/buyer_resources/industry-statistics-every-buyer-should-know/14/[AccessedFeb.24,2017]10“AGuidetoLifeInsuranceforSmallBusiness.”SunLifeFinancial.http://www.morganstanleyfa.com/public/facilityfiles/sb031117095201/22fd221e-2bc0-42a9-aadb-356b76260150.pdf[AccessedFeb.24,2017]11“WhySmallBusinessOwnersNeedLifeInsurance.”PolicyGenius.https://www.policygenius.com/blog/small-business-owners-term-life-insurance-protection/[AccessedFeb.24,2017]12Pence,Ralph.“SixWaysBusinessOwnersMayUtilizeLifeInsurance.”LinkedIn.https://www.linkedin.com/pulse/six-ways-business-owners-may-utilize-life-insurance-ralph-pence-clu[AccessedFeb.24,2017]13Hawks,Curtis.“UseTheseStatsduringLifeInsuranceAwarenessMonth.”LinkedIn.https://www.linkedin.com/pulse/use-stats-during-life-insurance-awareness-month-curtis[AccessedFeb.24,2017]14“NewSurveyFindsSmallBusinessOwnersUncertainaboutRetirementPlan,Finances.”TDBank.https://mediaroom.tdbank.com/2015-05-04-New-Survey-Finds-Small-Business-Owners-Uncertain-About-Retirement-Plan-Finances[AccessedFeb.24,2017]

15“TheStateofSmallBusinessinAmerica2016.”Babson.http://rethinkredtape.com/assets/content/State_of_Small_Business_in_America_2016_Full.pdf[AccessedFeb.24,2017]16“TheStateofSmallBusinessinAmerica2016.”Babson.http://rethinkredtape.com/assets/content/State_of_Small_Business_in_America_2016_Full.pdf[AccessedFeb.24,2017]17“NewSurveyFindsSmallBusinessOwnersUncertainaboutRetirementPlan,Finances.”TDBank.https://mediaroom.tdbank.com/2015-05-04-New-Survey-Finds-Small-Business-Owners-Uncertain-About-Retirement-Plan-Finances[AccessedFeb.24,2017]