A survey conducted recently by TD Bank demonstrated 26% of small business owners are not confident they will save enough money to retire comfortably. The survey of more than 660 small business owners nationwide questioned respondents about their management experience, confidence in business tasks and areas in which they need help.
Nearly half of survey respondents (47%) said they do not have plans in place for retirement, whereas about a quarter of respondents (24%) indicated their business would close, and 15% of business owners said they would transfer ownership of their business to a family member or coworker.
External factors affect retirement planning
“Building a small business is hard work, and it can be easy to get caught up in daily tasks such as paying invoices or increasing sales, but smart business operations need to consider the future, including the retirement of the owner,” Jay DesMarteu, head of Small Business Banking for TD Bank, said in a press release. “Just as those in the workforce should invest in themselves through retirement savings, small business owners need to have conversations about retirement and prepare for the future to ease the transition, whether that be closing or selling the business or passing it on to a family member.”
Todd Radwick, a tax-free retirement specialist with Radwick Financial Group LLC, said this business-wide problem applies in particular to niche fields like O&P.
“I think one of the challenges of an O&P business for [retirement] is that it is a unique field. It is a special field,” Radwick told O&P News. “It is not like if you own a [retail business], where anybody can just come in and [run the business]. There is a certain education required.”
He added that currently, O&P business owners do not have the resources that some specialty business owners like dentists have, in which they can utilize a dental office broker to help them transfer their business to a new graduate in the field.
“I have met with O&P clients who do want to retire and do want to leave [the profession], but they feel challenged in that; other than selling to a big conglomerate, they do not feel comfortable in just having somebody walk in and take over the place,” Radwick said.
Ready to step down
According to the American Board for Certification in Orthotics, Prosthetics & Pedorthics (ABC), 28.5% of the 5,068 ABC-certified practitioners are 55 years of age or older. Among Board of Certification/Accreditation (BOC) certificants, 1,114 are older than 55 years and among those, 293 are orthotic and/or prosthetic practitioners. Additionally, the National Commission on Orthotic and Prosthetic Education’s (NCOPE) 2015 Workforce Analysis, conducted by Dobson DaVanzo & Associates LLC, found the attrition rate of certified providers of O&P services — including retirement and all other changes away from patient care — will surpass O&P graduation rates and result in a declining supply of certified O&P providers.
Radwick said O&P business owners who are looking to sell in the future should find their business broker early.
“Rather than waiting until the last minute to sell, what [the brokers] like to do is get to know a business, preferably 2 years-plus before [the owners] actually plan on selling because there are things they can coach [the owners] on and prep them for to have their books appear more marketable [to potential buyers],” he said.
He added that business owners do not need to settle with the first broker they find.
“I think they would want to interview and meet with several [business brokers] until they find one who they think will be the most qualified,” Radwick said.
The broker does not need to cater specifically to O&P but needs to be able to meet the specific needs of the business owner.
“They want to find somebody who can help them clean up their books and make their business more marketable, but they also want to find a business broker who might be effective at locating someone who wants to get into the field,” he said.
Finding the right broker will ensure the business owner can spend his or her time running the business and taking care of patients, rather than focusing on finding a buyer.
Plans for the business, plans for the owner
In addition to planning for the future of the business, the O&P business owner needs to have a personal retirement plan in place. Of the business owners surveyed by TD Bank, 73% said they do not work with a dedicated banker or advisor, and 84% said they handle the finances themselves. Even those in need of help or advice often do not turn to an expert. Instead, the survey findings showed small business owners were most likely to ask friends or family for advice; 45% of respondents chose this as their first option, followed by 36% who look for help online and 32% who look to industry associations and networking groups.
The U.S. Department of Labor (DOL) states Americans will need 70% to 90% of their preretirement income to maintain their standard of living when they stop working. The DOL divides private-sector retirement plans into three groups: Individual Retirement Arrangement (IRA)-based plans, defined contribution plans and defined benefit plans.
Radwick said additional options are available for business owners looking for a safeguard.
“In times of uncertainty, there are retirement plans outside of IRAs, outside of [Simplified Employee Pension plans], outside of 401(k)s, that can allow the employer only to fund for themselves or to pick and choose who [they] do and do not contribute for,” he said.
An indexed universal life plan allows a business owner some protection from market exposure, as well as contribution, flexibly, according to Radwick.
No matter which plan a business owner chooses, the most important step is to start planning at all.
“I think everybody, including employees and employers, needs to start [planning for retirement] as soon as possible,” Radwick said. – by Amanda Alexander
- Davanzo A, et al. Projecting the Adequacy of Workforce Supply to Meet Patient Demand: Analysis of the Orthotics and Prosthetics Profession. 2015; Dobson Davanzo & Associates LLC.
- U.S. Department of Labor. Choosing a Retirement Solution for Your Small Business. Available at: www.dol.gov/ebsa/publications/choosing.html. Accessed June 30, 2015.
- TD Bank. New Survey Finds Small Businesses Uncertain About Retirement Plan, Finances. Available at: https://mediaroom.tdbank.com/2015-05-04-New-Survey-Finds-Small-Business-Owners-Uncertain-About-Retirement-Plan-Finances. Accessed June 30, 2015.
- For more information:
- Todd Radwick can be reached at Radwick Financial Group LLC, PO Box 1099, 5 Star Flower Road, Winthrop, WA 98862; email: firstname.lastname@example.org.
Disclosure: Radwick reports no relevant financial disclosures.