If you are an entrepreneur or small business owner, you are the one who’s in control regarding your financial future.  There is no one else to rely on when it comes to saving and planning for the future, so you must take on this matter yourself.  The thing is many traditional savings and retirement plans are unavailable to you due to income limitations.  Here are a few savings options for entrepreneurs and small business owners.

Solo 401(k)

A solo 401(k) plan is a great alternative to the traditional 401(k), and was created for self-employed individuals, entrepreneurs, and small business owners with no full time employees.  The only exception to this is if the small business owner’s spouse is an employee.  Solo 401(k) plans have simplified administrative rules, unlike their traditional counterparts.

The advantage of a solo 401(k) is that it is simple to use and maintain.  You may contribute up to $13,000 of tax-deferred income, in addition to up to 25% of profit from your business.  As long as you contribute no more than $41,000 annually, you fall within the limits of the solo 401(k).  The amount you contribute to a solo 401(k) is completely discretionary and can be decreased or suspended at any time.  Additionally, loans against your plan, as well as hardship withdrawals may be allowed.  Rollovers from previous 401(k) plans are allowed as well.  

There are a couple of drawbacks to the solo 401(k).  Naturally, there is a cost to establish and administer a solo 401(k), which may or may not be desirable for the individual investor.  Solo 401(k) plans may not ultimately end up meeting your needs for you and your business.  If your business grows, you may end up needing to hire on additional full-time employees.  When this happens, you are no longer eligible for a solo 401(k), and must revert to a traditional 401(k), which is far less simple to administer.

SEP IRA

An SEP IRA, or Simplified Employee Pension Individual Retirement Account, is a savings and retirement tool that can be used by both small business owners and self-employed people as well.  SEPs are considered part of a profit sharing program, and the employer may contribute up to 25% of a qualifying employee’s income to the fund.

SEPs are affordable and simple to administer, and is an excellent benefit to provide to employees.  If an individual is self employed, they are still able to put aside a little over 18% of their net profit, which is a powerful savings tool indeed.  Contributions to the plan are tax deductible, and standard income tax applies to the money once it is withdrawn for retirement use after the investor reaches age 59½.  Additionally, its high contribution limits make it very attractive ($46,000 in 2008).

One of the drawbacks of this type of retirement plan is that it is seen strictly as a profit-sharing plan, so employees must have another savings vehicle if they wish to put more money away on their own.  There is no catch-up payment clause for those who started saving later in life, as there is with the solo 401(k).

SIMPLE IRA

Savings Incentive Match Plans for Employees (SIMPLE) IRAs are fairly simple to administer, no-hassle IRA plans that offer a great benefit for employees in your small business.  Recommended for businesses with 10 or fewer employees, it s a great savings tool to offer for employees, and benefits both parties in the process.

SIMPLE IRAs allow employees to contribute up to $10,500 of their annual income to the plan.  Employers match this amount as part of the process.  Employees are then vested and are eligible to receive this money upon reaching retirement age.  Contributions are tax deductible.

For business owners, the drawback of this type of account is that the employees doesn’t have to earn his or her vesting, but is vested once the account is opened.  That means matching someone dollar for dollar who may not be around to help you grow your company may not be a sound investment.  SIMPLE IRAs are also very strictly administered and cannot be rolled over, nor can a traditional IRA or 401(k) be rolled into a SIMPLE IRA.

SOLO DB Plan

This plan is a slimmed-down version of a standard defined benefit plan.  If you are looking to save a whole lot of money over a short period of time and have the resources to do so, this is the plan for you.

Like other retirement plans, contributions are tax-deferred and the money is available to you once you reach retirement age.  These plans are very popular with people in business for themselves who are over 50 years of age, due to the ability to save vast amounts of money in a short period of time in order to meet future income requirements for retirement.

The drawback for this type of retirement account is that investors must be willing and able to contribute ongoing mandatory contributions of at least $45,000 for five consecutive years to keep this plan going.  For many, this amount of money is simply not possible.  For the well-compensated small business owner or entrepreneur, however, this account could be just perfect.

Do you have an Advisory Board for your business?  Have you considered it but you don’t know where to start?  An Advisory Board can be one of the best things that you can do for your business if you use it correctly.  It take work and it take commitment from everyone, done right everyone benefits.  Here are some steps to creating your Advisory Board.

1.  Select 3-10 people you believe can bring valuable assistance to your business.  I asked people who are in my network and  who new my products and services, they were raving fans. I had a high level of respect for each of them and their business success and I knew that they would hold me accountable.

2.  Ask each person if they would be willing to serve on your advisory board. You cannot get to yes if you do not open yourself to the possible no.  Let them know you value their opinion and would like to have them on your board.

3.  Let your board know how often you would meet, when you would meet, what you would like to achieve, and why you chose them to help you.

4. Set your first meeting and be prepared.  Start your meeting on time and have an agenda.  Let your board know what your goals are, what you are currently doing and what kind of things you want to do.  Let them ask you questions and get to know your board.  Above all, be completely prepared to work each time you meet.

5.  Thank your board, ask how you can help them.  I ask my board the last time we met, what it was that I could do for them.  Their response, “Keep doing what you are doing, be prepared and do what you say you will.”  I was very surprised, I am always prepared and always do what I say.  I also take great pains to find referrals for my board members.

A Board of Advisors is a great way to help you focus on your business and build strong relationships, it is a great way to strengthen your network.

are you working your Network.  I asked this question of several of the students in our Referral Dynamics Class last week and I later asked the same question of several BNI members.  In every case they said that they spent a great deal of time working their networks.  They attended the regular meeting, connecting with their fellow members, and they indeed did work their network.

Unfortunately that is not the network I was speaking of.  That is one of the places that you go to network, I was speaking to “Your” Network.  Those people whom you have in your database, those people who have met when you have been out networking.  How much time do you put into working your network, calling them up to reconnect, sending articles to them, meeting them for coffee, inviting them to events, or publishing them in your newsletter.  Do you track your activities and whom you are spending your time on?

The Referral Institute has a very handy tool called the “Networking Scorecard”.  This tool allows you to track the activities that you are spending on your network.  Creating a proactive process for nurturing your network, so when you have a need there is no problem picking up the phone and calling someone in your network and asking for help.  After all, you have spent quality time working your network.  Sometimes it is more important that you spend time developing what you have then adding more to the mix.  Once you have developed your network, then you can spend time adding more to the mix.

There is a great deal of pride in the size of a man’s, er, uhm well, you know, their network or at least the number of people in their database.  But, isn’t there an old saying about it’s not about how big it is but more about how…….um, well how well you know the people in your network?

Quality of quantity, visibility networking over credibility networking.  When you work in your network, building relationships, following up with people finding ways that you can help them and connect them you are building a stronger, more credible network. 

Recently, I wanted to meet a certain person who’s name will not be mentioned.  I began to ask my network, who had this person in their network and could they connect me.  Keep in mind, for me a connection is either a face to face introduction or a conference phone call where all three parties are on the call.  More than half my network had his name and number in their network, but only 2 people were able to pick up the phone and arrange a meeting and introduction and both of those people were willing to make that happen for me.    Only 2 people really knew the person I was looking for………so what good were the others?  What value is there in having a name and phone number in your network if you have not done anything to turn it into a relationship. 

Take time to develop your network, not just grow your network.  Take the time to build Credibility, in so doing, it will lead to Profitability! 

I had taken the time to build strong relationships with the 2 people who were willing to connect me, they were in my highly credible network and I was in theirs, so they did not hesitate to make the connection for me.   By the way, the 2 people who were able to connect me, theirs were not the biggest.

Ok, we know that the economy has gone south, credit is practically unavailable, businesses are drawing their spending back and so is the consumer, so what are you going to do as a business owner or sales manager to make sure that your business is not one of those that will be gone tomorrow?

The two places that most business want to cut back are not the wisest choices:

Training - A successful sales team or business owner stays involved with continuous training, keeping their prospecting, and sales skills sharp. This is the one place that the small business owner pinches their pennies, finding no value in quality training. It is important to keep new material in front of both the business owner and the sales teams.  Now is not the time to stop learning more about how to be a more effective sales person, how to implement referral systems that will generate higher referred prospects and how to close more deals.

Memberships -  Business Owners and Sales Managers alike begin to pull back on the networking groups and organizations where their teams have been spending time. A better result would be to diversify the organizations and make sure that you and your team are spending time in the right places with the right people and measure their results. 

After completing our course many of our clients are amazed at how much time they have invested in  networking activities that are not productive or effective.  If you and your people are out there networking then it is impotant that they be trained to do more than create visibility.  They must be able to effectively leverage their networks that become profitable for both parties.

Now is not the time to pull back, now is the time to become more strategic and more effective.