SMB Retirement Plan: The SEP

A SEP is a Simplified Employee Pension plan.

According to an American Express Open article written by Mike Periu, a “SEP is setup by a business for the benefit of its employees.” The good thing about a SEP is that it can be used by a single member LLC or by any other business with only one person drawing employment income. Hence, SEPs are great for single-person consulting firms or other personal and professional service providers. 

If your business has more than one employee, you can still use a SEP. A SEP, “is a tax-deferred individual retirement account.” So the business can contribute money on behalf of all of its employees. That’s also the primary limitation of the SEP. A SEP requires that all contributions be the same for all employees. In addition, neither you nor any employee can directly contribute; only the company can contribute. Therefore a SEP pension plan differs significantly from a 401(K) plan.

To read more on the subject, check out the article in its entirety, “Tailored Retirement for Small-Business Owners“.

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Small Business Saturday

You’ve heard of Cyber Monday? If not, this is the Monday following Black Friday (after Thanksgiving) when, apparently, everyone goes back to work and shops online from the comfort of their office or cubicle! Anyway, there’s now Shop Small Business Saturday® . This effort is designed to channel sales to small businesses all around the U.S. on the Saturday after Black Friday.

If you are a small business and want to take advantage of this marketing effort, check out the American Express® toolkit at <a href="http://pages.americanexpress.com/track?type=click&enid=bWFpbGluZ2lkPWFtZXJpY2FuZXhwcmVzc29wZW5CZXRhY3VzdC0xMTc2LTExMzYtMC0xMTMwLXByb2QtMTA4Jm1lc3NhZ2VpZD0wJmRhdGFiYXNlaWQ9MTA4JnNlcmlhbD0xMjk5NTIwMDQwJmVtYWlsaWQ9dHdyaWdodEB0b2NhZmFtaWx5c2VydmljZXMuY29tJnVzZXJpZD00MTA1MTMtMSZleHRyYT0mJiY=&&&amp;http://www.facebook.com/shopsmall?mkt_tok=3RkMMJWWfF9wsRonuqvPZKXonjHpfsX86uw…” style=”color: #006890;”>facebook.com/shopsmall. According to an American Express Open email I received, this subsite will provide “tools and resources that can help attract customers and grow your business.” It will also “help your business reach new customers throughout the year”. Good luck!
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Selling Your Company Isn’t the Answer…Or Is It?

I read an article on Inc. online earlier which quotes a serial entrepreneur as saying, “Selling your company doesn’t make you happy”. (The entrepreneur’s name is Ryan Carson and the article title was “Selling Your Company Won’t Make You Happy“.) The real question is: What does make you happy?

Question_mark

If you are an entrepreneur who thoroughly enjoys creating something from scratch and building it until it becomes a truly viable business, sustainable without you AND this process is what you enjoy most, then selling your business when it reaches this stage will make you happy. Then you can rechannel your efforts on finding some other problem to solve and another business to start from scratch. This kind of challenge and the need for this challenge is what often drives those who are classified as “serial entrepreneurs”, especially those who seem to sell out of their businesses every 5-7 years or so.

There are also entrepreneurs who take 10, 15, or 20 years or more to build a very large business who then sell for a variety of reasons. If you are truly bored with the business, you may be in need of a new challenge. Realize that if you started a business and grew it once, you can do it again. Or, if you bought a small business and grew it to a large business, you could do it again. So take the leap and sell.

However, if you have owned your business for a while, do not wish to retire, and are still enjoying your company, do not succomb to any pressure you may feel when you read about other entrepreneurs selling to private equity firms, competitors, larger companies, etc. Only you know what drives you and what drives you at any given point in time may differ than what drives others to sell. Sell or don’t sell. But let your needs and desires be the driver.

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Exploiting a Niche

I was at a recent dinner party for a nonprofit Board I was invited to join. (And I did. ) One of the attendees was talking about how he exploited the student housing niche over the last 2-3 decades. He started with one apartment near a large local university. He stayed on it until it cash flowed nicely, then he did it again. And again. And again. And so on.
He honed his strategy and his systems. He branched out to a broader geographical area but with the same focus. He has done quite well doing this. He advocated that I do the same.
I also read an article in the WSJ about smaller entities buying up ailing older mall properties. It’s the same principle. Niche exploitation.
Even if you wish to expand your offerings, focusing on one niche at first allows you to hone your product, system, marketing and strategy and do something extremely well. This is a play on the saying, “You can please some people some of the time but you can’t please everyone all of the time. ”
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Liens Are One Way to Protect a Contractor’s Right to Payment

As the primary contractor or a subcontractor or materialman, getting the construction or supply contract is the first order of business. The second? Ensuring you get paid. Without either, your business will wither and die. Properly structuring your contract is necessary for both.

The law provides contractors, subcontractors, and materialmen with several payment remedies

Construction_project

including bonds, liens, and claims under a provision called the Prompt Pay Act.  Those who provided services or materials for the construction or improvement of private property but did not receive payment on a reasonably timely basis may file a lien in the amount that is past due to secure the right to payment. Filing a lien creates an interest in the property in the amount filed.  A number of states disallow companies and individuals from filing liens against public property or projects but most public projects require bonds. In such cases, the contractors would pursue payment remedies against the bond.

To finish reading the article, Protecting Your Right to Payment: Liens, click on the link.

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Steps to Crowdfunding

Due to the inherent risk of an unproven venture, business start-ups rarely garner the support of the banking or investment community. However, if you can induce one group of individuals or one company to invest or lend, you can typically leverage that into additional funding. Why? Because people rarely want to be the first. Once they see that someone else is interested and felt comfortable enough to put their money in, the perceived risk drops.

Crowd

So how do you get the first group to invest? With the JOBS act, crowdfunding will become a more popular way of doing just that – getting the first group to invest. Crowdfunding – and the marketing that goes along with it – can be a great method of enticing smaller angel investors to invest in your company.

Want to know more? Click on the link to read the remainder of the How to Crowdfund; 3 Essential Steps article.

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Business Owners Delaying Retirement

According to a WSJ article, more business owners are delaying retirement because they can’t sell their companies for what they need to comfortably retire. I ask you, when did that become the valuation criteria?

I say over and over (and perhaps it is a good thing that I am brown skinned and have a summer tan so you can’t see the blue in my face!), you MUST create value that others appreciate in order to sell your business for a good price. How does one create value, you ask. By installing some professional management (i.e., a CEO or COO and CFO or Controller and a VP of Sales) for starters. If you have all the relationships and run the company without help at the high levels, I am just buying a job with the risk of you (the seller) becoming my greatest competitor!!

If you transfer the relationships to the head of sales, the risk drops. Or if your customers are locked up under 3-5 year contracts. Many of the owners in this article were working 12 – 16 hour days and/or hadn’t taken a vacation in years. Come on now. With that description, would you want to buy the company? If you’ve run it for 15-20 years and that’s where you are, what makes you think someone else can come in and do better? This is why the companies are not selling. Make the fundamentals more attractive and begin revamping your business into a salable asset, and it will sell. It may take a few years to shift it all, but it will be well worth it.

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