The start of spring is invigorating. You have renewed energy. As the snow starts to give way to warmer weather, you probably start to think about cleaning out your closets at home, dusting off all of your furniture, and even cleaning those walls and windows.
But don’t let spring cleaning stop at home. Use that new energy you have and improve your company. There’ll be much less elbow grease and a lot more professional evaluating and strategizing—and it’ll be worth it. Deciphering what strategies, plans, and tactics to keep, which to change, and which to purge can help your company grow and will likely improve your profits.
Here are some spring cleaning tips for your business.
1. Have Your Buy-Sell Agreement Reviewed
Hopefully, your company has a buy-sell agreement in place. This legal document between business partners and key senior mangers details the terms and prices of buying out the interest of a partner that is critical ill, retired, departing, or deceased. It makes good sense to have this last will and testament for your company.
But your company has likely changed over the years, and your agreement might not be up to date anymore. Now is the time for a buy-sell review. Such a review can ensure that your business valuation is current, that all partners and spouses’ needs are included, that all situations that put the agreement into action are included, and that, in general, your agreement reflects the modern times.
2. Review Your Health Plan
Your health plan could be costing you too much money. Cutting fees can significantly boost your profitability—you could save $1,000 or more per employee every year by moving to a high-deductible health plan paired with a health spending account or by switching to a self-funded health plan. A fifty-person company could increase pre-tax profits by $50,000, which could add about $200,000 or more in sale value. It might be the best idea you’ve had this year.
3. Improve Your 401K
Your 401K plan is no doubt critical, not only to your own retirement plans but to those of your employees. But when you have low plan participation and are paying far more than you should be, you’re not taking full advantage of all that your 401K plan has to offer.
So part of your spring cleaning should be to boost plan participation while cutting fees. Plan to educate your employees by helping them understand how the 401K can benefit them, how to invest, and how to maximize its offerings. Improve your plan design and create incentives to push your employees to save more—auto-enrollment, auto-escalation, a stretch match, and New Comparability should be considered.
Now reconsider your plan’s mutual funds. You can significantly slash fees by using passive mutual funds in your 401K’s investment line-up. These index funds cost less and likely perform better. Is your third-party administrator or record keeper costing you too much? Consider switching to a new one to save on costs; prices have dropped significantly in recent years.
Lastly, make sure you have the right advisor for your plan. If you haven’t heard from your 401K advisor in months or years, it’s time to shop around for a new one.
4. Create an Exit Strategy
There’s no time like the present to choose an exit strategy. Business exit planning is the process that prepares you to exit your company, whether due to disability or death, because you’re passing the reins to key employees or family, or because you’re selling to a third party and retiring. You never know what’s going to happen and why you’re going to leave your business, so you should cover all possible scenarios ahead of time. Some elements of exit planning take a long time, a lot can happen between now and when you retire, and without a plan, your business could fall apart after you go or you might end up with less money from the sale of your company than you expected. Protect your most valuable asset—your business—and create an exit strategy this spring.
Forward-looking statements are not guarantees of future performance and involve certain risks and uncertainties, which are difficult to predict. Past performance is no guarantee of future results.