Do you still want to be planning weddings and events when you are 65, 75 or 85 years old?
What age do you plan to retire?
Are you saving for retirement?
Do you plan to sell your business, dissolve it or give it to someone when you retire?
As a business owner, these are very important questions to ask yourself, even if you are just starting your event planning business.
When you are an employee for a company, it’s easy to save for retirement because most larger companies have a retirement plan setup that you automatically contribute to. As a small business owner, not only do we need to save for retirement, we need to decide what to do with our business when we want to retire.
A very simple way to start saving and investing for retirement is to open an IRA, start a SEP plan or start an individual 401k plan. Sage Wedding Pros has a fantastic breakdown and description of these retirement investing options. These options also offer tax saving advantages for small business owners. The good news is that even if you only invest $100 per month, you will have a small retirement fund that you didn’t have before. The bad news is that $100 per month still isn’t going to be enough for most people to retire on unless you start your investing plan very early in your career.
Here is a retirement investing example:
You invest $100 per month starting now
You want to retire in exactly 15 years
The interest rate you earn on your investments is 6% compounded annually (a general average)
=you will have an estimated retirement plan of about $28-$29k (the amount you contributed is $18k, the rest is interest earned)
This is a rather scary scenario when you think about. Who can retire on $28,000? That might get you through one year or so if you are frugal or it could be a small supplement to other income or social security for a short time. It certainly isn’t going to get you through 10-15 years of retirement bliss.
This post isn’t meant to scare you but to encourage you to take action. If you don’t have a retirement plan or if you are not contributing to some kind of long term savings account or investment plan, you could have a serious issue down the road when you get close to retirement age.
As a business owner, you also have to plan for your exit strategy. If you plan to sell your business in the future, it’s important to build your business so that you can sell it when you are ready. Built to Sell is an excellent book by John Warrillow that will take you through the lengthy steps necessary to build a valuable, sellable company for the future. I highly recommend reading it even if you aren’t planning to sell your business. The advice, lessons and examples are valuable for every business owner.
You may just plan to dissolve your business or pass it down to your children. These options are fine too but don’t discount the idea of possibly selling your company down the road.
Another thing to consider is that you may want to retire from this career much earlier and then do something different. Are you exploring what you might want to do next? If you didn’t plan events, what would you be doing instead? It’s never too early to think about the next phase of your career.