Retirement requires setting a plan, saving and installing systems that promote growth

Though most pizzeria owners hope they can at some point retire and soar into their golden years, many will remain grounded by the realities of funding a stable, comfortable retirement.

“The unfortunate bottom line is that many restaurant owners will not have a successful exit,” says Business Enterprise Institute co-founder John Brown, who has helped hundreds of small business owners plan for their post-business lives over the last 42 years.

And it’s a reality many small business owners, even against their most optimistic hopes, acknowledge themselves. In a recent Paychex Small Business Survey, 39 percent of small business owners said they were “not confident” they would be able to retire before age 65. Another 30 percent, meanwhile, reported being only “somewhat confident.”

That seven out of 10 small business owners lack confidence in their retirement readiness is a sobering note, especially given the energy, money and heart entrepreneurs pour into their operations.

But the truth is that many small business owners, pizza entrepreneurs included, struggle to plan for retirement, even if it is the ultimate target. They let the present consume them and dismiss retirement as a distant dream. They make faulty assumptions and fail to acknowledge that a successful retirement means playing the long game.

“Many small business owners became successful because they built their business using their own unique model and they look at their retirement plan through the same lens,” says Rick Miller, of Miller Advisors, a Brentwood, Tennessee-based financial firm that regularly counsels small business owners on fiscal planning, including retirement. “Unfortunately, the time frame needed to plan for a successful retirement is significantly longer than that for a successful small business.”

The foundation: Setting a plan and saving

As with success in business, success in retirement demands having a plan – and one executed as early as possible.

Both Brown and Miller urge business owners to sit with Certified Financial Planners (CFP) or Certified Public Accountants (CPA), professionals who are legally bound to provide clients with sound, objective information. While online tools can provide a rough overview of how much one might need to save for retirement, they lack the more holistic perspective and nuanced understanding of seasoned financial pros. Initial meetings with a CFP or CPA, a key first step, are often free and can jumpstart one’s journey to a comfortable retirement.

“These conversations will help you get educated on planning and saving and, quite honestly, offer a valuable taste of reality so you can take control of your financial destiny,” Brown says.

Adds Miller, who cautions against commission-driven advisors: “Finding someone with a teacher’s heart and an engineer’s attention to detail can be difficult, but this relationship is necessary, if not crucial to the overall success of your plan.”

With a retirement plan in place, owners should then adhere to a time-honored personal finance rule: pay yourself first.

“Put money away as early as you possibly can,” Brown says. “Money will, of course, need to be sunk into the business, but as soon as you have extra cash, invest.”

If available, favor accounts protected from creditors and forego risk-laden plays.

“The restaurant business is risky enough,” Brown reminds.

The road to retirement

After taking the critical first steps, the long haul toward retirement requires pizzeria owners stick to their financial plan and consistently monitor their asset statements, particularly paying attention to fees and investment risk levels.

“If you’re too conservative, you will slowly lose money to better opportunities in the markets. Plan too aggressively and you’re putting your retirement at risk to forces that are simply out of your control and very difficult to anticipate,” Miller says, adding that owners should begin “pulling back on the risk levers and moving toward safer options” as retirement nears.

In the long march toward retirement, owners should also focus on growing the value of their pizzeria — working on the business, not merely in the business. This includes establishing sound and systemized procedures for training, accounting, sales and marketing, working to create clear marketplace differentiators for the eatery, and grooming a capable management team.

“Ensuring the right systems are in place so the business is running efficiently is certainly an important piece of the retirement puzzle,” Brown says.

A smooth-running, differentiated restaurant, after all, has more value to prospective buyers or can continue to generate income for a retired owner who elects to retain ownership even while ceding daily operations to management.

If the golden years loom and an owner hasn’t yet accumulated wealth, well, the last-ditch effort to secure retirement isn’t an especially promising option.

“Start playing the lottery,” Brown says. “That’s why it’s so important in retirement planning to know where you’re going and diligently taking the steps to get there.”

4 Common Retirement Planning Mistakes

For many small business owners, the road to retirement includes its share of potholes. Seasoned advisors Rick Miller and John Brown urge pizzeria owners to avoid these frequent missteps:

Mistake #1: Failure to set a retirement budget. It’s virtually impossible to build a sound retirement plan without thoughtfully estimating retirement expenses, Miller says. Setting a budget helps owners understand the assets they will need to accumulate for their retirement cash-flow plan.

Mistake #2: Not paying enough self-employment/FICA taxes to have any material Social Security benefit. Social Security can be a steady supplement to one’s retirement income, Miller reminds. Capturing such benefits, however, requires an ongoing investment throughout one’s working years.

Mistake #3: Thinking the restaurant must be sold. Part of the hedge in establishing a differentiated business with capable management and proven systems is that the eatery can thrive beyond the owner. Brown reminds that retaining ownership and incentivizing management with a profit-sharing arrangement is another potential retirement path.

Mistake #4: Counting solely on the pizzeria’s sale to fund retirement. The pool of potential restaurant buyers isn’t deep, Brown says, and many prospects won’t have much more to offer than a small down payment and a promissory note, which isn’t enough to fund a comfortable retirement, especially if the pizzeria’s performance heads downhill.

Chicago-based writer Daniel P. Smith has covered business issues and best practices for a variety of trade publications, newspapers, and magazines.