5 Planning Tips that Can Help Your Small Business Grow and Thrive

One of the biggest responsibilities small business owners may face is making short- and long-term decisions that will affect their company’s operations, its employees and themselves.

Understandably, it’s the day-to-day challenges that typically get most of the attention from hard-working entrepreneurs who often are managing things on the go. Unfortunately, this means many of the financial planning strategies that can help stabilize, grow and protect the business end up being overlooked.

A forward-thinking plan that outlines the evolution of the company can help. Even if your organization has only a few employees, you may want to consider adding some common practices designed to boost recruiting and retention, improve employee morale and loyalty, and smooth the path going forward.

1. Key Person/Executive Compensation

Structuring special compensation packages for key employees and executives can help you reward, incentivize and hold onto personnel who have a significant influence on your business’s success. Along with an agreed-upon base salary, these packages also may include a deferred compensation plan, performance bonuses, retirement planning, life insurance and other benefits, as well as nonfinancial perks. Your Octavia wealth advisor can help you evaluate the various options for providing and funding this type of plan, as well as the tax implications and any documentation that’s involved. It may also be necessary to consult with a CPA to ensure these special compensation packages are properly structured.

2. Succession and Exit Planning

Have you thought about a time when you might turn over the reins to someone else in the company, sell your business, or shut it down? Even if you expect to pass control to someone else in your family or a longtime employee, you may want to create a succession plan that can help with the transition and keep the business stable after you’re gone. If you hope to sell, you’ll need to have some idea of what the company’s value is. Will key employees stay if you leave? What kind of payment terms will you accept and how might that affect your next endeavor? No matter which route you eventually choose, putting a plan in place now can help you avoid potential headaches (and maybe some heartaches) in the future.

3. Personal (Owner) Retirement Planning

According to SCORE (a nonprofit organization that helps U.S. small businesses), 34% of entrepreneurs haven’t yet set up a retirement savings plan for themselves. When asked why not, the respondents’ answers were pretty much what you’d might expect: 37% said they don’t think they make enough profit to save for retirement; 21% said they used their retirement savings to invest in their business; 18% said they plan to sell their business and use the money to fund their retirement; 12% said they don’t see a need to save for retirement; and 12% said they don’t plan to retire. There’s no doubt it can be difficult to separate your personal and business needs, but like most experienced wealth advisors, we recommend making regular contributions to a tax-advantaged retirement plan. It can help you build a nice nest egg with long-term compounding and potentially manage your risk by investing in more than your own business.

4. Employee Retirement Planning

Besides putting off saving for their own retirement, SCORE also found that small business owners are less likely than larger companies to offer retirement plans to employees. Many said workplace plans are too expensive to implement, or that they simply don’t have the resources to administer a plan. But owners who do offer plans told SCORE they’ve found the positives—including improved employee recruiting and retention—can outweigh the negatives. An added plus: Thanks to 2022’s SECURE Act 2.0, eligible small employers that establish a new SEP, SIMPLE IRA, 401(k) or other qualified plan for employees may be able to claim a tax credit of up to $5,000 each year of the plan’s first three years, for up to $15,000 total. (With an additional $500 available to those who set up automatic enrollment). Small employers also may claim a tax credit of up to $1,000 each year for contributions made over a five-year period to eligible plan participants.

5. Pooled Employer Plan

A Pooled Employer Plan (PEP) allows multiple employers to combine their resources in order to offer a retirement plan to their employees. This can be an appealing alternative for smaller companies, because with a PEP, most of the fiduciary oversight, plan management and other functions are outsourced to experts. At Octavia, we’ve partnered with The Retirement Plan Company and Voya to offer Total PEP Solutions, a new approach to retirement planning that can help mitigate risk, improve outcomes, and potentially lower the costs of providing employees with a defined benefit plan. Your wealth advisor can discuss this new opportunity with you and help you get started when you’re ready. We can also help you look at the pros and cons of offering a qualified retirement plan (such as a 401(k)) to all eligible employees vs. a nonqualifiedplan that’s available only to executives and key employees—or perhaps providing both.

Cultivating a Culture of Financial Well-Being

If you’re running a small business, implementing these strategies can be complicated. But taking the time now to design a financial plan that’s built to help your company succeed can be a big step toward creating a positive work environment for you and your employees.

You don’t have to do it alone. At Octavia Wealth Advisors, we love working with small business owners, helping them make informed decisions, and giving them the tools to adapt to changes inside and outside of their company. Schedule time now with an Octavia wealth advisor to discuss how proactive planning can help you improve your business and your brand.