Q: I’d like to buy a business but most of my funds are tied up in a rollover IRA. Is there any way to use those funds for a new business?
A: Yes, you can invest your retirement account funds in your own business. This can help get you off to a good start by building equity and reducing the need for debt and cash flow. These are important factors for the long-term success of your business.
Funding a small business through the use of retirement plans is ever more prevalent in today’s economic environment, as bank loans and other sources of capital have become more difficult to obtain. It can be attractive for individuals who have suffered from downsizing, closures and lay-offs or who have just retired early.
This type of self-reliant funding is available to just about anyone who has an existing retirement plan and who has terminated employment with the employer where the funds were accumulated or for someone who just has an IRA. The money invested through a properly designed retirement plan can be used to fund the start-up of a new business, purchase a franchise, purchase an existing business, and in some instances, raise capital for an existing business.
The process calls for the assets in your existing retirement plan to be rolled over – tax-deferred and penalty-free – into a newly established qualified retirement plan for you and your new company’s employees. Then the new IRA assets can be invested in the stock of the new company as well as mutual funds, individual stocks and other types of investments.
At the completion of the process, your new company can raise cash from the sale of stock to the retirement plan which in turn holds company stock as a plan asset. The cash can be used for legitimate investments in the business or to pay legitimate business expenses.
With this type of funding, it’s extremely important to consult with a firm that specializes in retirement plan design and administration. As with any qualified plan, compliance with rules and regulations is critical.
Business financing of any kind comes with risks – the risks inherently associated with opening a new business or purchasing an existing one. Before you decide to use your retirement funds, or any other type of financing for that matter, you should ensure that you have a viable business idea, a comprehensive business plan, adequate capital, and the consultation of small business professionals, like those at SCORE, who can provide advice and guidance for your new venture.
Sunday, 18 October 2009
Tuesday, 13 October 2009
The Value of FREE
I had an interesting discussion last week with an exhibitor at the SOHO business conference and trade show in Vancouver. Specifically, about the lack of promotional pizzazz being shown by the exhibitors. 
My friend’s company was giving away free product to anyone who visited the booth. It offers a service that people may use twice to 20 times a year, and it has extra inventory, so why not? Sampling is a time-honoured technique, good not only for getting prospects used to consuming your product, but also to attract people's attention in any competitive marketplace, such as a trade show.
My friend’s company was giving away free product to anyone who visited the booth. It offers a service that people may use twice to 20 times a year, and it has extra inventory, so why not? Sampling is a time-honoured technique, good not only for getting prospects used to consuming your product, but also to attract people's attention in any competitive marketplace, such as a trade show.
Ever notice how trade show attendees usually avoid eye contact with any sales people in the booths? That’s because they see no value in initiating any sort of relationship with you. It’s a lack of interest, lack of trust, and unwillingness to explore the ROI they might gain by doing business with you. All because you have not caught their eye by offering any obvious, easy-to-grasp VALUE.
So how do you overcome that? Offer something free! Not just a cheap knickknack for stopping by the booth (“How many free pens do you need?” asked my friend), but a real, knock-their-socks-off FREE offer that presents real value – and an acknowledgement that in today’s ultra-competitive markets, prospects are doing you a big favor by even considering your wares.
They say people are exposed to 3,000 marketing messages a day (or about a million a year). We all feel like the quarry in a fox hunt, being chased through the woods and hounded to death. You have spent a lot of money to be at this trade show: show your prospects a piece of that. Give them an offer (something free, or a whopping introductory discount) that reflects their true value to you.
It’s not just a cost of doing business. It’s the price you pay to be noticed and trusted.
Sunday, 4 October 2009
A Strategy for Beating Burnout
Q: I’ve worked hard for several years to build up my business, but the long hours, missed weekends and pressure-packed deadlines are wearing me down. What can I do?
A: There are a great many rewards in running your own business. But you must also be aware of the trade-offs and sacrifices that come with being in charge. Over time, the stress and strain may take their toll on your physical and emotional health, affecting relations with your employees, family and friends as well as impacting your business. Fortunately, there are many good ways to keep business burnout at bay.
First, identify those responsibilities or activities that are causing the stress. What aspects of running your business regularly cause discomfort or even anxiety? Perhaps you dread mundane tasks like bookkeeping and filing reports, or having to make sales calls. You may have customers who are difficult to work with, or do not pay invoices on time. And, because you are responsible for everything your business does, you may find yourself obsessing about things beyond your control.
One cure for an overburdened mind is to shed some of your responsibilities. Members of your staff with specific skills or leadership potential may be good candidates to take on certain functions. Consider using a company that specializes in offloading the administrative work of businesses. If you’re a solo entrepreneur, it may be time to hire your first employee or outsource to a part-timer.
Schedule some “me” time and stick with it. You follow a regular maintenance schedule for your equipment, so why not treat yourself the same way? A monthly lunch get-together with colleagues and designated family nights are great ways to get your mind off business issues and reconnect with the people who matter most to you. Even a quick walk around the block will do wonders to refresh your mind and spirit.
Sometimes, problems or challenges aren’t the cause of burnout; it’s the lack of them. Look for new challenges to stimulate your interest and energy. Recapture the thrill you experienced when starting your business by considering expanding or enhancing your products or services. Make sure you plan staffing and resources to support any new venture, however, so you don’t unnecessarily add to your workload.
Seek advice from experts, mentors or experts. Many sources of burnout are common to entrepreneurs and you can learn much from their experience. SCORE offers many valuable resources to help you resolve your small business dilemmas.
A: There are a great many rewards in running your own business. But you must also be aware of the trade-offs and sacrifices that come with being in charge. Over time, the stress and strain may take their toll on your physical and emotional health, affecting relations with your employees, family and friends as well as impacting your business. Fortunately, there are many good ways to keep business burnout at bay.
First, identify those responsibilities or activities that are causing the stress. What aspects of running your business regularly cause discomfort or even anxiety? Perhaps you dread mundane tasks like bookkeeping and filing reports, or having to make sales calls. You may have customers who are difficult to work with, or do not pay invoices on time. And, because you are responsible for everything your business does, you may find yourself obsessing about things beyond your control.
One cure for an overburdened mind is to shed some of your responsibilities. Members of your staff with specific skills or leadership potential may be good candidates to take on certain functions. Consider using a company that specializes in offloading the administrative work of businesses. If you’re a solo entrepreneur, it may be time to hire your first employee or outsource to a part-timer.
Schedule some “me” time and stick with it. You follow a regular maintenance schedule for your equipment, so why not treat yourself the same way? A monthly lunch get-together with colleagues and designated family nights are great ways to get your mind off business issues and reconnect with the people who matter most to you. Even a quick walk around the block will do wonders to refresh your mind and spirit.
Sometimes, problems or challenges aren’t the cause of burnout; it’s the lack of them. Look for new challenges to stimulate your interest and energy. Recapture the thrill you experienced when starting your business by considering expanding or enhancing your products or services. Make sure you plan staffing and resources to support any new venture, however, so you don’t unnecessarily add to your workload.
Seek advice from experts, mentors or experts. Many sources of burnout are common to entrepreneurs and you can learn much from their experience. SCORE offers many valuable resources to help you resolve your small business dilemmas.
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