Planning for the Future
I've been thinking about the events of this past year, which included my retirement from the retail shoe business (40 years) as well as my board service to the NSRA trade association (29 years). It was a year for me that included some serious health struggles. I wonder whether the average retailer is financially prepared to retire should their health give out or if some unforeseen event (such as a natural disaster) forces them out of business.
Thoughts on the subject:
Planning for Profitability
A well-run business produces a positive cash flow; some of which should be diverted in order to save for the future.
Pay yourself first when you can.
A business owner is the first to deserve pay (for the long hours and high risks taken) but often the last to get paid. Besides your salary (which should represent your worth as a Director of your business), the business owner deserves a return on his investment in good years to make up for years when he can’t take any out. Planning for that distribution of profit is a necessary part of the budgeting process. That profit should be paid out when possible and invested outside of the business when possible.
Diversify your investments.
Your net worth should not all be tied up in your retail inventory.
For one thing, inventory is a depreciating value.
Secondly, compiling a separate nest egg will add strength to your ability to help your business through the years when it needs additional investment.
I preferred to invest in Real Estate.
Real Estate is usually a good investment, especially when you can leverage it at a reasonable interest rate.
In addition, you can borrow against real estate equity a lot easier than borrowing against your inventory value.
You can either invest in the real estate that you operate your store out of (which I did), Investing in your store’s real estate keeps your business from experiencing high rent increases and protects you in very important ways, but.. then you really have all of your investment in the same bucket again.
…Or, you can invest in entirely different real estate (which many store owners feel is an even safer bet than the bet I made).
All businesses need to develop and revise their exit plan over time.
Learn from others.
For many reasons, seeking advice from others is always a good idea.
Network with other successful business owners; many have the same concerns as you do about how to get the most out of their businesses and plan for their own retirements. Information you share is usually paid back with additional insights and information that will help you plan out your future.
Create realistic expectations for your exit plan.
Some owners have unrealistic expectations for the value of their businesses and other owners have low expectations. Having realistic expectations is the only sure way to be in control of all your time and effort you put into your business.