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Retirement Savings, the Sacred Cow in Small Business

(sorry, got carried away and lost track of yesterday’s topic; instead, used summary of my notes for client meeting the next day)

There are two things that are very hard to do in the business world; one is to know when to start a business and the second is to know when to close a business.

As many of you know I advocate the establishment of three accounts for the small business owner:

  1. A business reserve account to be used for emergency survival. If the business experiences a slow down, this account will enable you to make necessary changes to get back on the right income track.
  2. A retirement account for the owner. The account name defines what it is; it’s sole purpose is to fund a retirement for the owner.
  3. A personal reserve account for the owner and family. If the business cannot provide the family income, then this account is used while seeking a new job or a new business to start.

If a business cannot be brought back to a profitable position by using the business reserve account, there are only two options left:

  1. Look for outside capital (investors)
  2. Close the business. Unfortunately, a small business owner may be  so “in love” with his business that the possibility of failure is not considered until all three of the above mentioned accounts are depleted.
    If you are running out of working capital call in a consultant to take an impartial look at your operation.

Using personal reserves and retirement funds to maintain a a going business  that is now losing money, is usually a bad judgment call.


The average for entrepreneurs is 3.8 failures before they finally make it in business.

Have a great day!

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