Most business owners have most of their financial assets tied up in the equity of their business, which can be a dangerous approach.  In today’s episode Grant reviews the importance of investing outside your business – even when it’s growing rapidly.   He also talks about different tax advantaged options available and the pros & cons of each.

 

 

Show Notes

[02:08] The familiarity bias – Grant starts the episode explaining why it’s tempting for business owners to invest extra cash in their own businesses.

[04:19] Why it’s dangerous – Grant describes, with stats from Exit Planning Institute and BizBuySell, why deploying 100% of your free cash back into your business is dangerous.

[09:50] Exit plan – The importance of having a business transition and exit plan.

[13:36] Available options – Grant talks about what options are available for investing outside of your business, starting with different types of retirement plans.

[18:28] Traditional IRA – How you can invest in a traditional IRA and what taxation applies to traditional IRAs.

[24:27] Roth IRA – Grant explains the features of Roth IRAs and why he’s a huge fan of Roth IRAs.

[29:09] Other options – How SIMPLE-IRAs and SEP-IRAs work and things you should consider before getting into these options.

[37:14] The 401(k) plan – Grant discusses qualified retirement plans & 401(k) plans.

[42:00] Working with a financial adviser – Grant describes the process of working with a financial advisor to set up a retirement plan & how he works with clients at Three Oaks Capital.

[46:12] Final thoughts – Grant sums up reasons to invest outside your business and the benefits from doing so.

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