Separate Your Business from Your Portfolio

Shift Your Retirement Risks Away from the Business

Each year more than 500,000 small businesses close their doors, including 20,000 to 40,000 that are shuttered by bankruptcy.¹

Whether you are building a small business or are at the helm of an established, successful enterprise, you know that it can take everything you have in terms of time and money to survive the competition while also turning a profit.

However, allocating too much of your investment capital to one company — even your own — is a risky proposition. Obviously, it would be unwise to devote your entire retirement portfolio to a single investment, but this is exactly what you are doing if you invest in your company to the exclusion of all else.

One way to help insulate your retirement from the risks associated with surviving in business is by investing outside of your company. Sometimes it might seem that your only option is to reinvest profits back in the business in order to keep it growing. But by investing away from the business, you may be able to help insulate your financial situation from fluctuations in the market in which you conduct business.

There are some potential benefits of building wealth outside the business:

Greater bargaining power when you eventually sell the business because you may be able to wait for the best terms rather than accepting the first offer.

Possible alternative source of income to help bridge the gap if the company enters a lean period.

Defense against a reduced retirement lifestyle in the event that your firm pays you less retirement income or fetches a lower sales price than you had expected.

It’s natural to want to put everything toward the success of your business. We can help you evaluate potential investment opportunities and decide whether now is a good time to begin building wealth outside your company.

1) U.S. Small Business Administration, 2008