Planning for Business Owners
Business owners to a large extent serve as the foundation of our free-market economy as they provide millions jobs, goods, and services to the community. Every company that exists today was at one point a small business.
For business owners, there are additional financial concerns over and beyond what employed Americans face and they have a host of additional challenges that they will likely have to contend with. For most business owners we work with, their business is often their most valuable asset as it is often the source of their family’s income as well as an enumerable number of tax benefits. For many it is also the engine that will one day be called upon to provide the retirement income for the business owner. Business owners by the very nature of their situation take on tremendous risk that employed people never experience.
Often times, the typical financial advice that business owners experience is very transactional and there is usually a heavy focus on products whether it being a 401k plan, pension, or insurance and the whole process can be very piecemeal. Our approach on the other hand is comprehensive, consultative, coordinated, and focuses on problem-solving.
What we do
For may our clients their business is their most valuable asset the first order of business is to protect the parts of the business that are at risk. Then we help grow the business by assisting in, retaining, and properly rewarding the best employees and lastly we assisting the business owner in exiting their business by helping them to realize the full value of their life’s work.
Often time upon the initial engagement with the out business-owning clients it will be discovered that there is some sort of a burning issue they have to take care of, often with a deadline. This could be needing to set up or review health insurance or possibly a 401k plan. After that is taken care of, a major focus is on business continuity. This helps to ensure there are no major disruptions to the business do to the loss of key people. After this issue is handled we start to turn the focus on to business exit planning which in essence is maximizing the value of the business and its cash flow before the transition.
Business owner investments
From our experience to the extent that business owners have outside investments, we find they tend to be very heavily weighted in cash and real estate. This is usually because cash and real estate tend to be safer assets and for business owners who are already taking enormous risk in their business the idea of taking substantial additional risk through stocks is often unappealing. To the extent that most business owners do have stocks, those stocks tend to be in inside their 401k or other retirement plans. Often as a result of the recommendation of their CPA as a way to reduce taxes. Most business owners prefer to own investment with the following four characteristics 1) they have a good rate of return 2) they are liquid and accessible 3) they provide tax advantages 4) they are low risk. Consequently, a big part of what we do for our clients is assist in setting up these types of investments.