New business owner - need help with experience Bogleheads!

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Topic Author
newyorker
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New business owner - need help with experience Bogleheads!

Post by newyorker »

Hi guys,

I am a new business owner (or soon to be). I bought a small dental office with 7 employees currently enrolled and it is already giving me a headache how I will be handling this.

First of all, for an accountant. Would it be the best to use the previous owner's accountant just for a smooth transition?



Secondly, how does Payroll work? I have never been an employer myself. Is this something that I can do DIY (I heard something like paychex) or do I hire an employee?



Lastly (and MOST IMPORTANT QUESTION). What should I do for my retirement? I have only done taxable account (just simply investing in Vanguard Brokerage). I have asked my accountants and one is recommending 401k (but I have to match for other employees???) and another one is recommending IRA. I have read about 401k and IRA but I really could not understand what is good for me and what is bad for me.

What do you guys recommend for a business owner???
Bucho
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Re: New business owner - need help with experience Bogleheads!

Post by Bucho »

Congratulations! I've owned or operated a handful of businesses.

For payroll, I've used a service called Gusto for 5-6 businesses. It's very easy, cost effective, and you can do it quickly yourself. Gusto, and services like it, handle your tax filings and nearly everything else you need.

You can do 401ks without a match to your employees. Your payroll service can typically handle provide an integrated option for 401ks, but check the fees for everything.

Regarding accounting, it depends on how much they are doing. If they are simply filing taxes, you can use anyone you prefer. If they are handling all the bookkeeping already, they already understand the flow. But you still need to make sure you trust them and will like working with them.

Good luck!
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newyorker
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Re: New business owner - need help with experience Bogleheads!

Post by newyorker »

Bucho wrote: Mon Oct 12, 2020 7:19 pm Congratulations! I've owned or operated a handful of businesses.

For payroll, I've used a service called Gusto for 5-6 businesses. It's very easy, cost effective, and you can do it quickly yourself. Gusto, and services like it, handle your tax filings and nearly everything else you need.

You can do 401ks without a match to your employees. Your payroll service can typically handle provide an integrated option for 401ks, but check the fees for everything.

Regarding accounting, it depends on how much they are doing. If they are simply filing taxes, you can use anyone you prefer. If they are handling all the bookkeeping already, they already understand the flow. But you still need to make sure you trust them and will like working with them.

Good luck!
Thank you. What do you use personally for your retirement? I heard 401k costs quite a lot to maintain and many owners say that its not worth the hassle. Is it better to simply skip retirement account and just invest in taxable account?
Bucho
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Re: New business owner - need help with experience Bogleheads!

Post by Bucho »

newyorker wrote: Mon Oct 12, 2020 7:50 pm

Thank you. What do you use personally for your retirement? I heard 401k costs quite a lot to maintain and many owners say that its not worth the hassle. Is it better to simply skip retirement account and just invest in taxable account?
I may be the wrong one to answer that question. I'm an entrepreneur and a very hands on investor and invest in private businesses. I have an IRA but I don't particularly rely on it for wealth building.

When I had 401k plans for employees, there really are some reasonable options so you just have to look around.
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AerialWombat
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Re: New business owner - need help with experience Bogleheads!

Post by AerialWombat »

I will second Gusto for payroll. Then, look at their integrated benefits partners for affordable employee 401k options.
mx711yam
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Re: New business owner - need help with experience Bogleheads!

Post by mx711yam »

I also use gusto for my 19 employee company. Big fan.
rossington
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Re: New business owner - need help with experience Bogleheads!

Post by rossington »

newyorker wrote: Mon Oct 12, 2020 6:39 pm Hi guys,

I am a new business owner (or soon to be). I bought a small dental office with 7 employees currently enrolled and it is already giving me a headache how I will be handling this.

First of all, for an accountant. Would it be the best to use the previous owner's accountant just for a smooth transition?



Secondly, how does Payroll work? I have never been an employer myself. Is this something that I can do DIY (I heard something like paychex) or do I hire an employee?



Lastly (and MOST IMPORTANT QUESTION). What should I do for my retirement? I have only done taxable account (just simply investing in Vanguard Brokerage). I have asked my accountants and one is recommending 401k (but I have to match for other employees???) and another one is recommending IRA. I have read about 401k and IRA but I really could not understand what is good for me and what is bad for me.

What do you guys recommend for a business owner???
1) Why will it be a headache if you have not even started yet? Doesn't seem like you thought this through enough. But:
2)Accountants to do your books are EXPENSIVE relative to doing your own via accounting software... can you handle it yourself? Or what about your spouse (if applicable).
3) What you shell out for someone else to do your books will definitely affect what is left for you.
4) ***You have MANY more expenses beyond payroll to consider***: Rent/Mortgage, Insurance, Equipment, Technology, Utilities, Advertising, *TAXES* etc.
5) Keep your retirement accounts for yourself. Roth and TIRA... even taxable. Your employees will always be turning over frequently...they (as you will see) will not be loyal long term. You will be the one that puts in the most time and sweat equity by FAR.
"Success is going from failure to failure without loss of enthusiasm." Winston Churchill.
hackandblaze
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Re: New business owner - need help with experience Bogleheads!

Post by hackandblaze »

Congrats on becoming a new business owner!

There's a few things that I would recommend having been in business for myself for almost 15 years:

1) As long as you're comfortable with the existing accountant I would try them out for the first year. After that you can assess if they're a good fit for your business. It took me a couple of different accountants before I found one that I really liked and understood my business well.

2) Do as much of your book keeping, payroll, and taxes as you can especially at first. You're going to learn a ton about what it actually takes to run your business and where you can possibly cut expenses. If you do hire an employee to do your books be sure to keep some tight checks and balances on them. I've heard some horror stories from other business owners...

3) We use Quickbooks for accounting and payroll and Tsheets for time tracking. After all these recommendations for Gusto I'm going to look into that and see how it compares.

4) If you're just starting out I would probably skip the retirement plan until you get your feet wet. It was years into my business before I set up a retirement plan for the employee's. I just did a traditional IRA for a long time. But for the past 5 years or so we've had a SIMPLE IRA. Ours is set up with Vanguard, but seems like a lot of people on here like Fidelity for the SIMPLE. If you have a spouse (that's not participating in another retirement plan) you can add them as an employee and max out theirs and your SIMPLE and get around $30,000 combined in tax advantaged savings per year. Vanguard was easy to work with to get it set up.

Good luck on your new business!
toomanysidehustles
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Re: New business owner - need help with experience Bogleheads!

Post by toomanysidehustles »

AerialWombat wrote: Mon Oct 12, 2020 10:42 pm I will second Gusto for payroll. Then, look at their integrated benefits partners for affordable employee 401k options.
I'll third Gusto - 6 employees run through for payroll.
carolinaman
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Re: New business owner - need help with experience Bogleheads!

Post by carolinaman »

I would use a separate accountant just to make sure of objectivity. Probably not much to worry about but just to be safe. Also, as a small business owner you should have a good understanding of the finances and monitor them closely. You may find that you can do the bookkeeping without the accountant's help.
charleshugh
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Re: New business owner - need help with experience Bogleheads!

Post by charleshugh »

First things first!

Instead of focusing on peripheral aspects of your your business, spend your time/energy on the business itself. Most importantly, this means spending time on improving your skills as a team leader and a small business manager. How well-developed are your soft skills. Believe me, you will need them!

Given that you are a new owner, how well do you know your employees? Are you confident that they will want to stay with you? Are they competent and reliable? Once we get past Covid, will they be searching for new jobs?

Focus on your customers. What are you doing to ensure that they don't take this time to find a new dentist (maybe one closer to home)?

If you haven't done so already, educate yourself on how to run a small business. How effective will you be as a boss? How do you manage customer service, personnel challenges, inter-personal disputes among staff, etc. There are a lot of good books/audio books on running a small business. If you haven't done so already, I would recommend you read a few. Personally, I would start with the classic "Good to Great" by Jim Collins.

In my career, I moved from being the firm's top account manager (with well-defined duties and responsibilities) to becoming vice president and COO of the company (a small business of about 100 people) where the duties were less defined. Reading business books provided me with a framework to think about my business. Many of the companies Collins references in "Good to Great" are long gone, but the characteristics of effective leaders/managers haven't changed.

About your accountant. I would say "slow down". Your accountant may be able to provide some insights/advice that far outweigh the cost of their service.
kbjeffrey
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Re: New business owner - need help with experience Bogleheads!

Post by kbjeffrey »

You might want to consider joining a PEO (Professional Employment Org), it won't provide accounting, but it has made running a small business much easier for me. A PEO administers the human resources functionality you choose. PEO's can be expensive, but there are more choices now. I head up a small software company and used to do admin for payroll service, 401k provider, HSA provide, Health Insurance... It was time consuming and I didn't have many choices.

There are quite a few PEO solutions out there. I chose Justworks two years ago and it has been affordable and really helpful. They have a nice UI for configuring benefits and reporting on payroll etc... I've gotten access to better prices and resources than I was able to on my own. As issues have come up like the PPP loans or changes to legislation for employers, they've been really helpful navigating them. For the PPP they had an online seminar to answer questions and give guidance. They created a report I was able to download with my payroll info from last year and they now have another report for the payroll spending for the PPP money. It made applying for the initial loan a lot easier to have a properly formatted file that I could just upload. For me joining a PEO has let me keep control of HR Issues, but still keep my business as my main focus.
bradinsky
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Re: New business owner - need help with experience Bogleheads!

Post by bradinsky »

OP,
I owned & operated a small manufacturing business in Ohio for 40 years. We used Quickbooks/Quickbooks Pro for the last 28 years, and found that to be very powerful, customizable & easy to use. Also, you will find that many CPA’s & PA’s are well versed in that software. We also used the QB payroll module, which was easy to use. I would definitely recommend engaging a new accountant. If you have a law firm you trust, you might ask them to refer one.
I found that one of the most difficult aspects of owning & operating the business was dealing with employees. Finding & retaining good, productive & loyal personnel is very difficult. Over the years, I was fortunate enough to hire & retain employees with tenures ranging from 16 to 35 years. When we hired a new employee, it was made clear to them that if they cared about the company, we would care about them. We paid them fairly, provided generous benefits & shared in the profits with yearly bonuses. Along the way, we also parted ways with those who did not have the company’s best interest at heart. Bad employees with poor attitudes can really impact your business relationship with your customers/patients.
After personnel issues, I believe finding new business & retaining it is huge. You must be fair & honest with your customers. With every job our company did for a customer, we always had an eye on the future. Providing a quality product at a reasonable price was the first priority. We wanted them to return, so we always strived to be fair, even when we had the opportunity to charge them excessively. Returning customers that are happy & satisfied are essential in building a business!
Being a new financially responsible business owner can be challenging. Starting out, it takes a lot of discipline to handle the business finances. That’s why most new businesses fail within 5 years. Timely billing, collecting money, paying employees & vendors requires strict discipline. For what it’s worth, many doctors are notorious for being lousy business people. They are experts in what they trained for, but lack the business acumen. That’s why the hire office managers to handle the finances.
Being a business owner can be very rewarding, both personally & financially. Sometimes it can also be extremely frustrating. OP, I wish you the very best!
Topic Author
newyorker
Posts: 207
Joined: Sun May 17, 2020 7:59 am

Re: New business owner - need help with experience Bogleheads!

Post by newyorker »

rossington wrote: Tue Oct 13, 2020 3:55 am
newyorker wrote: Mon Oct 12, 2020 6:39 pm Hi guys,

I am a new business owner (or soon to be). I bought a small dental office with 7 employees currently enrolled and it is already giving me a headache how I will be handling this.

First of all, for an accountant. Would it be the best to use the previous owner's accountant just for a smooth transition?



Secondly, how does Payroll work? I have never been an employer myself. Is this something that I can do DIY (I heard something like paychex) or do I hire an employee?



Lastly (and MOST IMPORTANT QUESTION). What should I do for my retirement? I have only done taxable account (just simply investing in Vanguard Brokerage). I have asked my accountants and one is recommending 401k (but I have to match for other employees???) and another one is recommending IRA. I have read about 401k and IRA but I really could not understand what is good for me and what is bad for me.

What do you guys recommend for a business owner???
1) Why will it be a headache if you have not even started yet? Doesn't seem like you thought this through enough. But:
2)Accountants to do your books are EXPENSIVE relative to doing your own via accounting software... can you handle it yourself? Or what about your spouse (if applicable).
3) What you shell out for someone else to do your books will definitely affect what is left for you.
4) ***You have MANY more expenses beyond payroll to consider***: Rent/Mortgage, Insurance, Equipment, Technology, Utilities, Advertising, *TAXES* etc.
5) Keep your retirement accounts for yourself. Roth and TIRA... even taxable. Your employees will always be turning over frequently...they (as you will see) will not be loyal long term. You will be the one that puts in the most time and sweat equity by FAR.


I agree with #5 but how do you do it? Seems like sep ira requires employer contribution for employees
rossington
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Re: New business owner - need help with experience Bogleheads!

Post by rossington »

newyorker wrote: Tue Oct 13, 2020 10:08 am
I agree with #5 but how do you do it? Seems like sep ira requires employer contribution for employees
That's why I recommended don't do any retirement accounts that involve employees. More to do and more potential headaches down the road.
"Success is going from failure to failure without loss of enthusiasm." Winston Churchill.
Topic Author
newyorker
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Re: New business owner - need help with experience Bogleheads!

Post by newyorker »

rossington wrote: Tue Oct 13, 2020 12:21 pm
newyorker wrote: Tue Oct 13, 2020 10:08 am
I agree with #5 but how do you do it? Seems like sep ira requires employer contribution for employees
That's why I recommended don't do any retirement accounts that involve employees. More to do and more potential headaches down the road.

What type of retirement account do you recommend then? Some retirement accounts (like sep ira) mandated employee involvement
bradinsky
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Re: New business owner - need help with experience Bogleheads!

Post by bradinsky »

rossington wrote: Tue Oct 13, 2020 12:21 pm
newyorker wrote: Tue Oct 13, 2020 10:08 am
I agree with #5 but how do you do it? Seems like sep ira requires employer contribution for employees
That's why I recommended don't do any retirement accounts that involve employees. More to do and more potential headaches down the road.
It is true that you do get a fair amount of employee turnover. It is also true that retention of a couple of key employees makes it much easier to operate your business. You will never retain those key people by “keeping it all for yourself”. Think about it - new employees mean you, or someone else are constantly training the new hires. That’s not cost effective & also it’s a PIA.
rossington
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Re: New business owner - need help with experience Bogleheads!

Post by rossington »

newyorker wrote: Tue Oct 13, 2020 12:32 pm
rossington wrote: Tue Oct 13, 2020 12:21 pm
newyorker wrote: Tue Oct 13, 2020 10:08 am
I agree with #5 but how do you do it? Seems like sep ira requires employer contribution for employees
That's why I recommended don't do any retirement accounts that involve employees. More to do and more potential headaches down the road.

What type of retirement account do you recommend then? Some retirement accounts (like sep ira) mandated employee involvement
Your own personal ones...TIRA and Roth. Don't forget you will have control over your income.
"Success is going from failure to failure without loss of enthusiasm." Winston Churchill.
bradinsky
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Re: New business owner - need help with experience Bogleheads!

Post by bradinsky »

If you’re curious about a retirement vehicle for yourself, you might want to look into a Keough Plan. It has a much higher contribution limit than an IRA. I believe it’s around $54K.
rossington
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Re: New business owner - need help with experience Bogleheads!

Post by rossington »

bradinsky wrote: Tue Oct 13, 2020 12:33 pm
It is true that you do get a fair amount of employee turnover. It is also true that retention of a couple of key employees makes it much easier to operate your business. You will never retain those key people by “keeping it all for yourself”.

He won't keep it "all for himself". He will have a lot of expenses known and unknown...he gets what is left.
Think about it - new employees mean you, or someone else are constantly training the new hires. That’s not cost effective & also it’s a PIA.
Having employees is the toughest part of running a business. He will be new at this. Having a small number of employees means you are in an up close and more personal environment. You are going to learn about them, their personal lives and ultimately their personal issues and problems. It will all come down to chemistry, certain people will be loyal because they like working there for whatever reasons. Other are always going to be leaving. I'm only making the point that he does not need add an additional thing to do with the extra expense and issues of offering an employee retirement plan. Maybe in the future but not in the beginning. Don't forget the OP said it is already giving him a headache thinking about everything.
"Success is going from failure to failure without loss of enthusiasm." Winston Churchill.
smitcat
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Re: New business owner - need help with experience Bogleheads!

Post by smitcat »

newyorker wrote: Mon Oct 12, 2020 6:39 pm Hi guys,

I am a new business owner (or soon to be). I bought a small dental office with 7 employees currently enrolled and it is already giving me a headache how I will be handling this.

First of all, for an accountant. Would it be the best to use the previous owner's accountant just for a smooth transition?



Secondly, how does Payroll work? I have never been an employer myself. Is this something that I can do DIY (I heard something like paychex) or do I hire an employee?



Lastly (and MOST IMPORTANT QUESTION). What should I do for my retirement? I have only done taxable account (just simply investing in Vanguard Brokerage). I have asked my accountants and one is recommending 401k (but I have to match for other employees???) and another one is recommending IRA. I have read about 401k and IRA but I really could not understand what is good for me and what is bad for me.

What do you guys recommend for a business owner???

A few questions from your process of doing diligence might help...
- are you buying the real estate as well or purchasing the book of business?
- is this an assett sale?
- what accounting package is in use now?
- what method of payroll is in place now?
- what does the current employee manual include for: vacation, sick , holidays, funeral leave, retirement plan, disability , comp, etc
I would assume that you want to preserve and perhaps increase the value of the business , some (much) of that will be directly related to the service that the staff distributed to the current cleints.
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White Coat Investor
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Re: New business owner - need help with experience Bogleheads!

Post by White Coat Investor »

newyorker wrote: Mon Oct 12, 2020 6:39 pm Hi guys,

I am a new business owner (or soon to be). I bought a small dental office with 7 employees currently enrolled and it is already giving me a headache how I will be handling this.

First of all, for an accountant. Would it be the best to use the previous owner's accountant just for a smooth transition?



Secondly, how does Payroll work? I have never been an employer myself. Is this something that I can do DIY (I heard something like paychex) or do I hire an employee?



Lastly (and MOST IMPORTANT QUESTION). What should I do for my retirement? I have only done taxable account (just simply investing in Vanguard Brokerage). I have asked my accountants and one is recommending 401k (but I have to match for other employees???) and another one is recommending IRA. I have read about 401k and IRA but I really could not understand what is good for me and what is bad for me.

What do you guys recommend for a business owner???
Use the other accountant. You can always change later.
The accountant can help with payroll but it will likely be outsourced to a payroll company. You or your office manager will still be involved.
The retirement issue is complicated and not a do it yourself project. The right plan may be a 401k, a SIMPLE, a SEP, or no plan at all. Your practice (i.e. its employees, their ages, and how much they are likely to contribute) will need to be studied to get to the right answer.
1) Invest you must 2) Time is your friend 3) Impulse is your enemy | 4) Basic arithmetic works 5) Stick to simplicity 6) Stay the course
bradinsky
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Re: New business owner - need help with experience Bogleheads!

Post by bradinsky »

rossington wrote: Tue Oct 13, 2020 1:48 pm
bradinsky wrote: Tue Oct 13, 2020 12:33 pm
It is true that you do get a fair amount of employee turnover. It is also true that retention of a couple of key employees makes it much easier to operate your business. You will never retain those key people by “keeping it all for yourself”.

He won't keep it "all for himself". He will have a lot of expenses known and unknown...he gets what is left.
Think about it - new employees mean you, or someone else are constantly training the new hires. That’s not cost effective & also it’s a PIA.
Having employees is the toughest part of running a business. He will be new at this. Having a small number of employees means you are in an up close and more personal environment. You are going to learn about them, their personal lives and ultimately their personal issues and problems. It will all come down to chemistry, certain people will be loyal because they like working there for whatever reasons. Other are always going to be leaving. I'm only making the point that he does not need add an additional thing to do with the extra expense and issues of offering an employee retirement plan. Maybe in the future but not in the beginning. Don't forget the OP said it is already giving him a headache thinking about everything.
If you see my post above, I agree that employees are just about the most difficult aspect of running a business. Sometimes it’s like being a kindergarten teacher:) I was pretty much hands on for 40 years. I started with zero business experience, but confidence in my abilities regarding my profession. I like people so it was easy to interact with the customers. It took me a few years to learn the business end & I made up for my lack of business experience at the onset by working long hours. If I were OP, I would not worry about a retirement plan for the employees for a few years. I would treat them fairly, and if he has a profitable year, he could consider sharing some of it informally. Not a profit sharing plan. Good employees want to be recognized. I’m sure that in your career, you wanted recognition & $$. We all do!
smitcat
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Re: New business owner - need help with experience Bogleheads!

Post by smitcat »

bradinsky wrote: Tue Oct 13, 2020 2:14 pm
rossington wrote: Tue Oct 13, 2020 1:48 pm
bradinsky wrote: Tue Oct 13, 2020 12:33 pm
It is true that you do get a fair amount of employee turnover. It is also true that retention of a couple of key employees makes it much easier to operate your business. You will never retain those key people by “keeping it all for yourself”.

He won't keep it "all for himself". He will have a lot of expenses known and unknown...he gets what is left.
Think about it - new employees mean you, or someone else are constantly training the new hires. That’s not cost effective & also it’s a PIA.
Having employees is the toughest part of running a business. He will be new at this. Having a small number of employees means you are in an up close and more personal environment. You are going to learn about them, their personal lives and ultimately their personal issues and problems. It will all come down to chemistry, certain people will be loyal because they like working there for whatever reasons. Other are always going to be leaving. I'm only making the point that he does not need add an additional thing to do with the extra expense and issues of offering an employee retirement plan. Maybe in the future but not in the beginning. Don't forget the OP said it is already giving him a headache thinking about everything.
If you see my post above, I agree that employees are just about the most difficult aspect of running a business. Sometimes it’s like being a kindergarten teacher:) I was pretty much hands on for 40 years. I started with zero business experience, but confidence in my abilities regarding my profession. I like people so it was easy to interact with the customers. It took me a few years to learn the business end & I made up for my lack of business experience at the onset by working long hours. If I were OP, I would not worry about a retirement plan for the employees for a few years. I would treat them fairly, and if he has a profitable year, he could consider sharing some of it informally. Not a profit sharing plan. Good employees want to be recognized. I’m sure that in your career, you wanted recognition & $$. We all do!
"If I were OP, I would not worry about a retirement plan for the employees for a few years"
What would your thoughts be if the existing business already has a retirement plan in place for the existing staff?
rossington
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Re: New business owner - need help with experience Bogleheads!

Post by rossington »

smitcat wrote: Tue Oct 13, 2020 2:50 pm
bradinsky wrote: Tue Oct 13, 2020 2:14 pm
rossington wrote: Tue Oct 13, 2020 1:48 pm
bradinsky wrote: Tue Oct 13, 2020 12:33 pm
It is true that you do get a fair amount of employee turnover. It is also true that retention of a couple of key employees makes it much easier to operate your business. You will never retain those key people by “keeping it all for yourself”.

He won't keep it "all for himself". He will have a lot of expenses known and unknown...he gets what is left.
Think about it - new employees mean you, or someone else are constantly training the new hires. That’s not cost effective & also it’s a PIA.
Having employees is the toughest part of running a business. He will be new at this. Having a small number of employees means you are in an up close and more personal environment. You are going to learn about them, their personal lives and ultimately their personal issues and problems. It will all come down to chemistry, certain people will be loyal because they like working there for whatever reasons. Other are always going to be leaving. I'm only making the point that he does not need add an additional thing to do with the extra expense and issues of offering an employee retirement plan. Maybe in the future but not in the beginning. Don't forget the OP said it is already giving him a headache thinking about everything.
If you see my post above, I agree that employees are just about the most difficult aspect of running a business. Sometimes it’s like being a kindergarten teacher:) I was pretty much hands on for 40 years. I started with zero business experience, but confidence in my abilities regarding my profession. I like people so it was easy to interact with the customers. It took me a few years to learn the business end & I made up for my lack of business experience at the onset by working long hours. If I were OP, I would not worry about a retirement plan for the employees for a few years. I would treat them fairly, and if he has a profitable year, he could consider sharing some of it informally. Not a profit sharing plan. Good employees want to be recognized. I’m sure that in your career, you wanted recognition & $$. We all do!
"If I were OP, I would not worry about a retirement plan for the employees for a few years"
What would your thoughts be if the existing business already has a retirement plan in place for the existing staff?
Then the OP would already be aware of it. It seems he is exploring his options and the pros and cons.
bradinsky's advice is sound IMHO.
"Success is going from failure to failure without loss of enthusiasm." Winston Churchill.
bradinsky
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Re: New business owner - need help with experience Bogleheads!

Post by bradinsky »

“What would your thoughts be if the existing business already has a retirement plan in place for the existing staff?”

As rossington stated, OP should be aware of that. Perhaps that was addressed in the sales contract. If not, I would personally sit down with each employee to see how they react to a new owner/boss. I was demanding at times, but always tried to be fair. The bottom line was that the business had to be profitable first. Without that, everything else is immaterial.

Brad
niceguy7376
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Re: New business owner - need help with experience Bogleheads!

Post by niceguy7376 »

For any professional to have the most put aside for a retirement plan on cheap is to be the Sole Employee.
Once you have employees, you cant just have a generous retirement plan but not offer it to employees.

If you are not going to have the same employees stay longer than a year, then you can put a limit on the number of hours worked before they are eligible for 401k.
As a business owner, just like any other field, it is the relationships between the owner and employees and also the relationship of all of you with your customers that matter more in terms of having consistent revenue.

From my own experience, I would also recommend gusto for payroll. They are also rolling out a lot of benefits along with 401k options.

We currently dont have 401k but have a SIMPLE IRA for long time. We match any employee contributions at 3%. So IF THEY CONTRIBUTE, we match some. SIMPLE IRA will prevent you from doing backdoor roth.
smitcat
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Re: New business owner - need help with experience Bogleheads!

Post by smitcat »

rossington wrote: Tue Oct 13, 2020 3:18 pm
smitcat wrote: Tue Oct 13, 2020 2:50 pm
bradinsky wrote: Tue Oct 13, 2020 2:14 pm
rossington wrote: Tue Oct 13, 2020 1:48 pm
bradinsky wrote: Tue Oct 13, 2020 12:33 pm
It is true that you do get a fair amount of employee turnover. It is also true that retention of a couple of key employees makes it much easier to operate your business. You will never retain those key people by “keeping it all for yourself”.

He won't keep it "all for himself". He will have a lot of expenses known and unknown...he gets what is left.
Think about it - new employees mean you, or someone else are constantly training the new hires. That’s not cost effective & also it’s a PIA.
Having employees is the toughest part of running a business. He will be new at this. Having a small number of employees means you are in an up close and more personal environment. You are going to learn about them, their personal lives and ultimately their personal issues and problems. It will all come down to chemistry, certain people will be loyal because they like working there for whatever reasons. Other are always going to be leaving. I'm only making the point that he does not need add an additional thing to do with the extra expense and issues of offering an employee retirement plan. Maybe in the future but not in the beginning. Don't forget the OP said it is already giving him a headache thinking about everything.
If you see my post above, I agree that employees are just about the most difficult aspect of running a business. Sometimes it’s like being a kindergarten teacher:) I was pretty much hands on for 40 years. I started with zero business experience, but confidence in my abilities regarding my profession. I like people so it was easy to interact with the customers. It took me a few years to learn the business end & I made up for my lack of business experience at the onset by working long hours. If I were OP, I would not worry about a retirement plan for the employees for a few years. I would treat them fairly, and if he has a profitable year, he could consider sharing some of it informally. Not a profit sharing plan. Good employees want to be recognized. I’m sure that in your career, you wanted recognition & $$. We all do!
"If I were OP, I would not worry about a retirement plan for the employees for a few years"
What would your thoughts be if the existing business already has a retirement plan in place for the existing staff?
Then the OP would already be aware of it. It seems he is exploring his options and the pros and cons.
bradinsky's advice is sound IMHO.
I do not see that in the post - I see that he is not aware of how payroll is being done either.
smitcat
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Re: New business owner - need help with experience Bogleheads!

Post by smitcat »

bradinsky wrote: Tue Oct 13, 2020 4:00 pm “What would your thoughts be if the existing business already has a retirement plan in place for the existing staff?”

As rossington stated, OP should be aware of that. Perhaps that was addressed in the sales contract. If not, I would personally sit down with each employee to see how they react to a new owner/boss. I was demanding at times, but always tried to be fair. The bottom line was that the business had to be profitable first. Without that, everything else is immaterial.

Brad
I do not see that in the post - I see that he is not aware of how payroll is being done either.
I would think that there would be numerous employee questions if he had that detail when asking these questions.
bradinsky
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Re: New business owner - need help with experience Bogleheads!

Post by bradinsky »

smitcat wrote: Tue Oct 13, 2020 4:38 pm
bradinsky wrote: Tue Oct 13, 2020 4:00 pm “What would your thoughts be if the existing business already has a retirement plan in place for the existing staff?”

As rossington stated, OP should be aware of that. Perhaps that was addressed in the sales contract. If not, I would personally sit down with each employee to see how they react to a new owner/boss. I was demanding at times, but always tried to be fair. The bottom line was that the business had to be profitable first. Without that, everything else is immaterial.

Brad
I do not see that in the post - I see that he is not aware of how payroll is being done either.
I would think that there would be numerous employee questions if he had that detail when asking these questions.
Smitcat,
I’m guilty of assuming that it would’ve been addressed in a purchase agreement. As you stated, I’m sure there would be many questions & concerns. When you’re dealing with someone’s livelihood, that becomes difficult for all parties. Because OP is purchasing an existing business, it’s to the benefit of all parties involved that the business continues to operate as smoothly as possible, until OP has the opportunity to assess what he actually bought. Until then & probably afterwards, existing employees are extremely important.

Brad
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Re: New business owner - need help with experience Bogleheads!

Post by smitcat »

bradinsky wrote: Tue Oct 13, 2020 6:24 pm
smitcat wrote: Tue Oct 13, 2020 4:38 pm
bradinsky wrote: Tue Oct 13, 2020 4:00 pm “What would your thoughts be if the existing business already has a retirement plan in place for the existing staff?”

As rossington stated, OP should be aware of that. Perhaps that was addressed in the sales contract. If not, I would personally sit down with each employee to see how they react to a new owner/boss. I was demanding at times, but always tried to be fair. The bottom line was that the business had to be profitable first. Without that, everything else is immaterial.

Brad
I do not see that in the post - I see that he is not aware of how payroll is being done either.
I would think that there would be numerous employee questions if he had that detail when asking these questions.
Smitcat,
I’m guilty of assuming that it would’ve been addressed in a purchase agreement. As you stated, I’m sure there would be many questions & concerns. When you’re dealing with someone’s livelihood, that becomes difficult for all parties. Because OP is purchasing an existing business, it’s to the benefit of all parties involved that the business continues to operate as smoothly as possible, until OP has the opportunity to assess what he actually bought. Until then & probably afterwards, existing employees are extremely important.

Brad
I agree - I would have thought that all of these would have been reviewed within the due dilgence process but since they were asked in this post I take nothing for granted.
Issues with retirement accounts for staff, how to take retirement income for owners etc should have been fairly clear from the K1's and addback sheet to support the reported profits.
I would guess that many other unknowns could be learned from the past 3 years P & L's with a bit of review and discusion. In this case it may be that the best deal is to get the previous owners agreement to 'stay on' as a consultant for XXX weeks/months untill this is reasonably understood and worked out.
Hopefully between all of us posting this has helped the OP somewhat.
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newyorker
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Re: New business owner - need help with experience Bogleheads!

Post by newyorker »

hackandblaze wrote: Tue Oct 13, 2020 7:11 am Congrats on becoming a new business owner!

There's a few things that I would recommend having been in business for myself for almost 15 years:

1) As long as you're comfortable with the existing accountant I would try them out for the first year. After that you can assess if they're a good fit for your business. It took me a couple of different accountants before I found one that I really liked and understood my business well.

2) Do as much of your book keeping, payroll, and taxes as you can especially at first. You're going to learn a ton about what it actually takes to run your business and where you can possibly cut expenses. If you do hire an employee to do your books be sure to keep some tight checks and balances on them. I've heard some horror stories from other business owners...

3) We use Quickbooks for accounting and payroll and Tsheets for time tracking. After all these recommendations for Gusto I'm going to look into that and see how it compares.

4) If you're just starting out I would probably skip the retirement plan until you get your feet wet. It was years into my business before I set up a retirement plan for the employee's. I just did a traditional IRA for a long time. But for the past 5 years or so we've had a SIMPLE IRA. Ours is set up with Vanguard, but seems like a lot of people on here like Fidelity for the SIMPLE. If you have a spouse (that's not participating in another retirement plan) you can add them as an employee and max out theirs and your SIMPLE and get around $30,000 combined in tax advantaged savings per year. Vanguard was easy to work with to get it set up.

Good luck on your new business!
Sorry for a late reply. Just got back from work. And thank you for your kind reply.

I will look into quickbooks (which are recommended by both accountants) and gusto. Do you just buy the software version (so that you don't have to pay anymore) instead of subscription?

I agree with you. Won't touch retirement plan until I am experienced. I assume I can do my personal retirement plan without having to do company one.
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newyorker
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Re: New business owner - need help with experience Bogleheads!

Post by newyorker »

carolinaman wrote: Tue Oct 13, 2020 7:31 am I would use a separate accountant just to make sure of objectivity. Probably not much to worry about but just to be safe. Also, as a small business owner you should have a good understanding of the finances and monitor them closely. You may find that you can do the bookkeeping without the accountant's help.

Do you mean separate accountant as in the new one right? I need to learn how to do book keepings.
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newyorker
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Re: New business owner - need help with experience Bogleheads!

Post by newyorker »

charleshugh wrote: Tue Oct 13, 2020 7:56 am First things first!

Instead of focusing on peripheral aspects of your your business, spend your time/energy on the business itself. Most importantly, this means spending time on improving your skills as a team leader and a small business manager. How well-developed are your soft skills. Believe me, you will need them!

I agree. Soft skills are the most important things



Given that you are a new owner, how well do you know your employees? Are you confident that they will want to stay with you? Are they competent and reliable? Once we get past Covid, will they be searching for new jobs?

Focus on your customers. What are you doing to ensure that they don't take this time to find a new dentist (maybe one closer to home)?

If you haven't done so already, educate yourself on how to run a small business. How effective will you be as a boss? How do you manage customer service, personnel challenges, inter-personal disputes among staff, etc. There are a lot of good books/audio books on running a small business. If you haven't done so already, I would recommend you read a few. Personally, I would start with the classic "Good to Great" by Jim Collins.

In my career, I moved from being the firm's top account manager (with well-defined duties and responsibilities) to becoming vice president and COO of the company (a small business of about 100 people) where the duties were less defined. Reading business books provided me with a framework to think about my business. Many of the companies Collins references in "Good to Great" are long gone, but the characteristics of effective leaders/managers haven't changed.

About your accountant. I would say "slow down". Your accountant may be able to provide some insights/advice that far outweigh the cost of their service.

What do you mean by slow down? Should I just stick with the original one?
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newyorker
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Re: New business owner - need help with experience Bogleheads!

Post by newyorker »

bradinsky wrote: Tue Oct 13, 2020 9:16 am OP,
I owned & operated a small manufacturing business in Ohio for 40 years. We used Quickbooks/Quickbooks Pro for the last 28 years, and found that to be very powerful, customizable & easy to use. Also, you will find that many CPA’s & PA’s are well versed in that software. We also used the QB payroll module, which was easy to use. I would definitely recommend engaging a new accountant. If you have a law firm you trust, you might ask them to refer one.
I found that one of the most difficult aspects of owning & operating the business was dealing with employees. Finding & retaining good, productive & loyal personnel is very difficult. Over the years, I was fortunate enough to hire & retain employees with tenures ranging from 16 to 35 years. When we hired a new employee, it was made clear to them that if they cared about the company, we would care about them. We paid them fairly, provided generous benefits & shared in the profits with yearly bonuses. Along the way, we also parted ways with those who did not have the company’s best interest at heart. Bad employees with poor attitudes can really impact your business relationship with your customers/patients.
After personnel issues, I believe finding new business & retaining it is huge. You must be fair & honest with your customers. With every job our company did for a customer, we always had an eye on the future. Providing a quality product at a reasonable price was the first priority. We wanted them to return, so we always strived to be fair, even when we had the opportunity to charge them excessively. Returning customers that are happy & satisfied are essential in building a business!
Being a new financially responsible business owner can be challenging. Starting out, it takes a lot of discipline to handle the business finances. That’s why most new businesses fail within 5 years. Timely billing, collecting money, paying employees & vendors requires strict discipline. For what it’s worth, many doctors are notorious for being lousy business people. They are experts in what they trained for, but lack the business acumen. That’s why the hire office managers to handle the finances.
Being a business owner can be very rewarding, both personally & financially. Sometimes it can also be extremely frustrating. OP, I wish you the very best!

Thank you for your kind words! I agree that business is about retaining people, both employees and customers. It is frustrating as you say... but gotta try hard.
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Re: New business owner - need help with experience Bogleheads!

Post by rossington »

newyorker wrote: Tue Oct 13, 2020 8:14 pm I agree that business is about retaining people, both employees and customers. It is frustrating as you say... but gotta try hard.
You are spending a portion of your life's savings on purchasing your dental practice. It cannot be frustrating to you now, you're feet are not wet.
What will be frustrating to you will be if you can't cope with being a business owner moving forward. So you have to make sure you are prepared and willing to deal with everything that will be necessary to get your practice to be successful over a very long time.
All the best to you!
"Success is going from failure to failure without loss of enthusiasm." Winston Churchill.
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Re: New business owner - need help with experience Bogleheads!

Post by LadyGeek »

As a reminder, this forum is for personal use only - you, your family, or your friends. The OP has a personal interest in owning a business, which is fine. However, the discussion is moving to one of running a business - hiring employees and business specific finances.

Let's try and stay focused on the personal side, which is:
newyorker wrote: Mon Oct 12, 2020 6:39 pm Lastly (and MOST IMPORTANT QUESTION). What should I do for my retirement? I have only done taxable account (just simply investing in Vanguard Brokerage). I have asked my accountants and one is recommending 401k (but I have to match for other employees???) and another one is recommending IRA. I have read about 401k and IRA but I really could not understand what is good for me and what is bad for me.

What do you guys recommend for a business owner???
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