Self-Directed IRA & Small Business Financing Blog

On June 5th, 2009, Entrepreneur.com released an article about the 7 Essential Startup Steps. The article did a pretty good job of identifying steps that a new small business or franchise owner can take before launching to ensure a higher likelihood of success. They suggested that one:

• Do more market research
• Find the right financing
• Hire a great attorney
• Get a good CPA
• Use the right business entity
• Pick a good name
• Make sure you have the proper licensing and permits

This general information is very helpful for entrepreneurs. Having helped more than 4,000 people fund a business through 401(k) small business investing, Guidant has seen many different people from all walks of life go into business for themselves. There is one thing that we know brings immeasurable value to a new business owner…building a great team! This can include, but is not limited to a business broker or franchise consultant, attorney, CPA or tax professional and much more.

If you are considering opening or buying a business or franchise and would like to meet a professional in any of these areas – call us. We will happily make an introduction!

As we expected, the "talk of the town" news at Apple's Worldwide Developer's Conference, was a new model of the iPhone.

The new model is called the iPhone 3G S and this one can record video, take pictures on it's three-megapixel camera, downloand data twice as fast as the current 3G model (like the one's Guidant's officers use!) will start at $199 for a 32-gigabyte model. It comes with a three-megapixel camera. In addition, users will be able to plug into MMS technology that allows the sending of pictures via text message.

If you are a small business owner or investor - the iPhone is a must-have technological device...at least we think so!

Scott Halford's column, Brainy Business, was fantastic today! Found on Entrepreneur.com, Scott focused on How to Avoid Self-Sabotage. He points out three very great points to consider:

• Avoid the "yes but..." trap. Instead, try using "yes and" so that you're additive to the idea process, not a detractor. You'll create barriers for yourself if you allow "yes but" to infect ideas.
• Create separate from evaluation. Brainstorm ideas free from evalution will allow creativity to flow. You can always go back later and try to evaluate whether it's valid or not.
• Think first, speak second. If you verbalize a negative emotion...it's more likely to become true (even if it's not in the first place).

We found this article very interesting because many individuals talk themselves out of starting a business because they act emotionally rather than logically about the decision. In addition, some of the greatest ideas never get off the ground because they are evaluated too quickly.

So what is the real lesson? Let your steak marinate for a few days before you cook it.

Do you think you need hundreds of thousands of dollars to buy or start a business? That may not necessarily be true! There are many low-cost franchise opportunities for individuals who are interested in owning a business.

Each year, Entrepreneur Magazine releases their Franchise500 list and subsequent lists to celebrate different franchise categories. This year, they ranked the following businesses as the top low-cost franchise opportunities:

• Instant Tax Service
• Jani-King
• Jan-Pro Franchising Int'l Inc.
• Kumon Math & Reading Centers
• ServiceMaster Clean
• Merle Norman Cosmetics
• Stratus Building Solutions
• Jazzercize Inc.
• Vanguard Cleaning Systems
• RE/Max Int'l Inc.

These franchisors, although not endorsed by either Guidant Financial Group or Entrepreneur, offer a way for new small business owners, franchisees and entrepreneurs to get into business for less than $50,000. A business or franchise of this size can still be financed, fairly easily, in this market. Many people are using 401(k) small business investing or unsecured loans to acquire their business. In addition, an SBA loan can still be a viable option.

Before you invest in any business or franchise it's important that you investigate the opportunity by interviewing attorneys, consultants and existing franchisees (if applicable). In addition, make sure you work with a reputable small business financing company so that you can adequately capitalize your small business or franchise investment.

MarketWatch released an article on May 21, 2009 that suggested most investors should avoid self-directed IRAs. In “Why Most Investors Should Avoid Self-directed IRAs,“ Robert Powell details three main reasons:

• It is unclear who is regulating this industry;
• The IRS guidelines are complex; and
• There are very few “experts.”

While we appreciate his perspective, we do not feel it is as simple as to suggest this type of investing is only for the wealthy. We believe that individuals have the ability to make good wealth-building decisions when provided correct information.

The rules for investing in alternatives investments using retirement funds have been outlined within the Internal Revenue Code - IRC 4975. He is right – they are complex and subject to facts and circumstances. That is why you need to work with a company (not just an individual) that really understands how these rules apply to the assets you are interested in investing in. There is no space between us on this one.

But then he is also correct that there are very few experts in the field. Unfortunately, there are a lot of self-proclaimed self-directed IRA experts using social media and paid advertising to assert their position as a leader, but don’t be mislead. Do your due-diligence and involve your tax professional and investment advisor to find a firm you feel is most qualified to help you properly facilitate self-directed IRA transactions. Please consider that just because you saw them on Twitter, read a blog post about them or they have written a book does not make them an expert. Here are a couple of things to consider:

• How long have they been around?
• How many clients do they have? (If they have 2 – run!)
• How big is their company? (Size does not necessarily mean better…but it’s indication of their potential experience and strength)
• What value do they provide? (Do not shop purely based on price! If you accidentally run afoul of the rules for self-directed IRA investing, your entire IRA could be distributed. If you have a $100,000 self-directed IRA – you could be forced to take that as income, plus penalties, and pay 40-50% to the government. Saving a few hundred bucks to work with a discount provider is not a good strategy. )
• Are they registered with the Better Business Bureau and what does their history provide?
• Have they been honored, recognized or endorsed by other reputable organizations?

We have always asserted that self-directed IRAs allow people to invest in what they know and understand. It would be difficult to argue that the stock market was safer to invest in than real estate (if you know what you're doing)…especially after this year. Even spirited money man Jim Cramer recently said that real estate is a better investment than stocks today.

Self-directed IRAs allow you to decide that investments you feel are most prudent for your retirement plan. If you feel the stock market is better – buy stocks! If you like real estate…invest in that. The same goes for tax liens, private mortgages and gold. Self-directed IRAs let you invest in your core competencies and there are safe and effective ways to do it.

If you want to learn more about self-directed IRAs or real estate IRAs – contact us!