IRA Vs 401k – an Amazingly Simple Small Business Retirement Plan Decision

The question of IRA vs 401k leaps to mind when setting up a small business retirement plan. Do you know the differences between plans? What does the Internal Revenue Code allow and restrict? Why should you even care? Because if you sell fixed indexed annuities and want to capitalize on one of the hottest specialty markets going today (setting up retirement plans for small business owners with 1 to 9 employees), you’ll want to brush up on IRA vs 401k and other important considerations.

First, consider that a small business retirement plan, now more than ever, is the best way to defer large amounts of tax-deductible dollars. Thanks to the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA), self-employed taxpayers now have unprecedented incentives to save for retirement. A business owner’s decision is quite literally whether to keep company profits… or send them off to Uncle Sam.

OWNER GETS MORE

It’s no secret the allure of a small business retirement plan is directly related to benefits available to the owner. The greater the owner’s share of the overall plan, the greater the interest. Before the new tax legislation, restrictions on owner’s benefits in small plan design often resulted in even fewer benefits for the employees. But the tools are now in place to ratchet up the owner’s benefits and still create a workable plan for the employees. So, should the plan be an IRA or a 401k? Let’s examine IRA vs 401k separately.

SIMPLIFIED EMPLOYEE PENSION

The simplest small business retirement plan for self-employed taxpayers and the easiest to set up and maintain is the Simplified Employee Pension (SEP). You may establish a SEP if you earn self-employment income, regardless of whether you have employees. A SEP is an Individual Retirement Account (IRA) and if maintained for more than one person becomes a group of IRAs.

All contributions to a SEP are tax deductible as a business expense. As an IRA the plan’s earnings are not taxed until they are withdrawn at retirement. As usual, withdrawals prior to age 59 ½ with this and other plans incur a 10% penalty. A SEP-IRA does not permit loans or salary deferral contributions. Also, the individual annual contribution limit for 2006 is the lesser of 25% of compensation or $44,000, and contributions may be reduced or skipped altogether in lean years.

INDIVIDUAL 401(k)

Another handy tool in the EGTRRA toolbox is the Individual or Solo 401(k). This small business retirement plan is ideally suited for businesses in which the owner or owners (and their spouses if working at the business) are the only employees. The biggest reason for opening a one-person 401(k) is the higher contribution limits allowed, plus the fact that contributions are based on revenue generated by the business.

The maximum tax-deductible employer contribution is 25% of gross eligible payroll. For 2006 the maximum effective salary deferral contribution for employer plus employee is $44,000 plus a catch-up contribution of $5,000 for individuals age 50 and over. Loans are permitted subject to limits and rules, and paperwork may be just a filing of the streamlined IRS Form 5500-EZ when plan assets exceed $100,000.

NEVER A BETTER TIME

The new tax law creates a multitude of opportunities with more than 60 new provisions to strongly encourage the startup and funding of your small business retirement plan. Variations in plan design allow opportunities to suit independent contractors, sole-practitioner professionals, small retail owners — virtually every type of small business imaginable. Answer the question of IRA vs 401k and you’re on your way.

For small business owners in search of large tax breaks, it doesn’t get any better than this. There has never been a better time than right now to convert current taxes into assets, defer tax payments, and generate large amounts of retirement income. And for you as the fixed indexed annuity specialist, this market is virtually untapped.

4 Reasons Why Twitter Is a Waste of Time for Small Business Owners

We’ve all heard the hype: “you NEED to be Facebooking, Twittering, blogging and YouTubing if your business is going to survive in the next five years.”

But spare a thought for the humble small business owner, generally a one or two person operation, maybe up to five… time poor, money poor (GFC?) and with little computer education let alone a working knowledge of the internet and social media.

But with all the so-called ‘Social Media Gurus’ out there whose advice do you follow (even if you do have the time to invest in learning)…?

For many small business owners Social Media is the bane of their existence, a necessary evil they HAVE TO DO… just because everyone else is doing it. Yet, if they’re going to take time out of their busy schedule to ‘do’ Social Media how on earth are they going to make money from it, how are they going to get a return on their investment?

Social Media is full of wishy-washy slogans like ‘enter the conversation’, ‘meet customers on their terms’ and ‘let customers tell you what they want from your business’. How is a small business owner to make sense of any of this, let alone make money for their business?

Twitter is a much talked about Social Media website yet it could be the undoing of many small business owners that dare to spend their days ‘tweeting’, re-tweeting, following and hash tagging.

Here are 4 reasons why Twitter is a waste of time for small businesses owners:

1. Time – tweeting takes time, and what small business owner do you know that isn’t time poor? If you had a few hours spare each week to tweet, there are better ways to spend it.

2. Money – we’re all in business to make money, yet when it comes to social media a select few seem to know how to do it. We hear how Dell Computers made $4million on Twitter last year. Is Dell a small business? No. They have a huge team whose sole responsibility is to perfect their social media. But how is a time-poor small business owner going to make money from Twitter? They could hire someone but at what hourly cost? They have to make that back and more to make it even worthwhile.

3. Lead Generation Strategy – for a small business to run smoothly they must have one or more lead generation strategies. And when it comes to Social Media the same SHOULD hold true. Yet the majority of small business owners use social media randomly – a tweet here, a post there – but where’s the system? To make it work you need a strategy. Twitter is a place for you to build you ‘expert’ status. Credibility which leads to expert status takes time and what small business owner has unmetered time?

4. Customisation – Twitter allows you 140 characters per ‘tweet’. Sure, you can customise the picture on your profile, but who cares? Twitter allows zero customisation to give your business profile an edge, nor does it offer opportunity to capture business leads.

For small business owners who want a return on their Social Media investment they need a tool that can help them do that. They need a system in place to get the results they’re looking for and it needs to run on auto-pilot the majority of the time. If Twitter can’t offer this, what Social Media Site can?

The answer is Facebook. Facebook ticks all the boxes that Twitter doesn’t. With Facebook, Small Business owners can:

– invest little time, but with the RIGHT knowledge, can gain a financial return on the time they invest

– Invest little money aside from an upfront setup cost (assuming they hire an expert to set it up for them)

– Systemise a lead capture procedure that brings in qualified leads right to their email inbox

– Customise – as of March 10, 2011 Facebook offers customisation for anyone to insert a ‘mini-website’ within their Facebook Page which gives them full control over the content they place on their Facebook Page.

Should Small Business Owners Rely on Google?

Let me start by saying that Google are not out to hurt small businesses however they often do. For many small business owners the idea of being on the first page of Google for meaningful phrases within their industry is very attractive. If done properly Search Engine Optimisation (SEO) can have a massive impact on the visitors and ultimately sales or leads a small business generates through their web site.

The problem is most small business owners want to target the most generic of phrases i.e. “New Car” which has a huge amount of searches each month and so is very competitive and therefore a small business would have to invest a lot of time and money to achieve this. Often entry level SEO Companies will promise the earth when it comes to delivering phrases like this and will often give unrealistic time frames and unrealistic costs. The problem here is that it takes a small business 3-4 months sometimes to find out that these promises are unrealistic and therefore 3-4 months have been wasted not only from a cost point of view but from a lead generation / sales point of view.

There are other issues when it comes to targeting generic phrases like this in that even if a small business found a partner that could deliver these phrases in a timely fashion because they are so generic and because the search volumes are massive then the leads generated can often be very high. Just what the Doctor ordered you might think however the leads tend to be wildly different in quality from very early stage researchers, to clients ready to buy now and so unless you have the infrastructure, team and processes to qualify, filter and nurture all of these leads then many will get wasted.

So how does Google fit into this process?

There are typically three types of SEO Company:

Entry level SEO Companies who concentrate on very long tail phrases (very specific like “New Car for sale in the South of England”) which generate little if any searches and therefore little if any traffic and ultimately little if any leads / sales. These companies will typically concentrate on a little on page optimisation and very little if any link building.

Agency style optimisation companies – the agency model works very well with bigger blue chip companies who want a bespoke service have the time and money to invest on generating good quality generic phrases and have the people in house to manage and quantify the leads and enquiries. This type of model involves employing real quality SEO specialists who take a bespoke view on each client when it comes to their optimisation both online and offline. This model works well when a specialist has 5-10 accounts to work with and the company charge a lot of money for each project. This means that when Google makes changes to their algorithms they have the time and resource to make the changes necessary for each client. The problem with this model is when it is employed for small business owners because the company cannot charge a lot of money, therefore the SEO Specialist has to work on 60-100 plus clients and so even if success is achieved in the first instance when Google makes changes the SEO Specialist and company are incapable of coping and keeping up. The big problem here is that often the small business owner has come to rely on the traffic and sales from Google and if they lose these the impact can be massive.

Specialist Small Business SEO Companies – There are surprisingly very few companies who are specialists in this field and the big difference between this model and the agency model is that the companies who do this have developed world class processes and often software so that their specialists can handle multiple accounts and therefore truly keep the cost of optimisation low. The major difference here is that if Google do make changes then because of these processes and software the specialists can implement the necessary alterations to client sites instantly, seamlessly and with minimal impact to results ongoing. This type of company tend to focus on quality long tail phrases which do generate good profitable traffic however they will also have software that helps the small business owner maximise this traffic by making improvements to the whole of the online sales funnel and turn it into leads and sales.

Google are always making changes to their algorithms to prevent spammers, unscrupulous affiliate programmes and companies involved with the likes of click fraud. The problem is a lot of these companies produce small poor quality web sites to do this and so Google are always moving towards better quality, content rich, constantly updated web sites to feature high on their rankings. Unfortunately small business owner web sites tend to be more like the spammer model than they do the blue chip model and therefore often get affected by Google’s changes albeit quite innocently.

It is essential therefore if you are a small business owner that you look beyond the initial three months and the glamour and allure of the “Big Phrase” and work with a partner who can deliver long term sustainable leads and sales via your web site and can cope with the whims and moods of Google.

For Small Business, Marketing Or Lead Generation – Which is Better?

THERE BOTH THE SAME I HEAR YOU SAY!

Making the mistake of thinking they are the same thing can be a costly experience. Let’s break it down to the two separate areas and lets see if we can find some differences.

1. Marketing: Usually something you have to pay for that is never guaranteed to get a return on your money.

2. Lead generation: Free or cheap methods to promote your business that may take nothing more than your time and the willingness to think out side the square!

I’m surprised at the amount of small business owners I have met who pay for marketing purely for marketing sake. What I mean is, they know they have to put the word out there about their business so they take a regular spot in the local newspaper or tv guide, come up with new sales pitches week after week and then sit back and pray that customers will come flocking in.

Don’t get me wrong this can be a very effective method as a way to brand yourself, keep your business name in people’s heads until they are ready to buy and occasionally stimulate new business, but the main problem I find is that when you ask the small business owner how much return are they getting on their marketing expenses, and they usually wouldn’t have a clue! They are spending money on marketing that they really don’t know if it is working or not!

Lets look at marketing types. Flyers, business cards, websites, newspaper ads, tv ads etc. These and any other marketing types ONLY become lead generators if someone is compelled to pick up the phone and call you, email you, or hop in their car and drive to your business to purchase your product or service!

Until this occurs then it is purely marketing! If it is not driving customers to purchase or enter your follow on marketing system (you do have a follow on marketing system dont you?) then it is “money generating” for someone else but not lead generating for you.

Business cards are a great example of a marketing tool that usually isn’t a lead generation tool. Someone asks you what you do you hand them your business card that has you pretty logo on it, your name with six different titles under it to look impressive and your contact details. They may be impressed with your logo or how many titles you have to your name and look you up, but in most cases the card will go in their back pocket, probably through the wash later that day never to be seen again!

You need to point out to the potential new customer that if they or someone they know, are interested in your product or service then on the back of the card are the details of how they can get something “special” if they call, email etc. You have to drive that customer to take action and generate that lead! In most small businesses the greatest lead generator is a satisfied customer that is more than happy to tell anyone and everyone about their experience with your business.

Most small businesses have sales systems, external marketing strategies, but very few have referral systems or strategies. Spending a little money on a referral program or reward system for customers that refer business is money much better spent. The customer takes ownership of your business if they are getting something in return, and the business they refer comes pre-sold on your products or services, much easier to get the sale!

The point is make sure no matter what form of marketing, advertising or lead generation campaigns you do, you have to come up with some way of getting the potential customer to take action. Every person that calls, emails or drops in to your business. Ask them how they heard about you so you can at least measure if your marketing budget is going to good use. It may surprise you to see the results!