As complicated as financial planning can be, most people assume their own plan is simpler than it really is. I’ve had clients tell me, “Planning for us shouldn’t take too much time, our life isn’t that complicated.” But that’s rarely the case, especially if you own a business. Oftentimes these same people need to have two or three strategy meetings about just one aspect of their plan.
When it comes down to it, there are usually several factors people fail to consider when preparing for the future—they simply don’t think about certain circumstances or don’t know how a specific investment plan works. At Atlas Financial, our primary goal is to help clients think through their planning needs for themselves. We don't want to tell you what to do; instead, we want to inform you and guide you so you can choose exactly what steps to take.
People tend to avoid planning for two reasons: busyness and ignorance. Business owners especially have a lot going on in their lives with running a company, spending time with family, and everything else that life has to offer. But people also avoid what they don’t understand, and unfortunately, no one teaches people basic planning concepts to the public. Unless you actively seek information about investments, retirement plans, and insurance, you’re left in the dark. And researching on your own can be difficult when you don’t even know where to start or what questions to ask.
That’s why we’re here—we’re going to walk you through several elements of your plan to consider when planning for the future, whether you’re a business owner, retiree, or a professional focused on building your career. We want you to understand the planning landscape and open your eyes to the things you might be missing so you can make choices that align with your goals.
The best way to ensure you make the right decisions for your business is to understand all of your options and weigh the pros and cons—and sometimes you can’t do that until someone points them out to you.
I have clients who own a business together and reached out to me for some advice about paying off their SBA loans. The four partners had several thousand dollars in the bank and they asked me (and their CPA) whether they should use it to pay off their loans or keep it as cash on hand. Their CPA suggested they pay off the loans, but I wanted them to make the decision for themselves. I had them consider the advantages and disadvantages of both options:
Pro: If they paid off the loans now, they could save money in interest.
Pro: If they paid off the loans now, it would free up their cash flow, since they would no longer have loan payments tying up their expenses.
Con: If they paid the loans, it would take three to four years to recoup the money and have that cash on hand.
At this point, it might seem like a no-brainer to pay off the loans—but these partners are young and they grow their business primarily through acquisitions, so they need cash on hand to buy out other businesses. That’s how they grow, so to them, keeping money in the bank was ultimately more important to the growth of their business. That’s why it’s important to understand the exact consequences of certain planning decisions, rather than having someone simply tell you what to do—what’s important to one advisor may not make sense to a certain client’s business model.
Most business owners are fairly confident about generating income for the future through their revenue and investments, so traditional retirement planning isn’t always a top concern. But when you run a company, you have a lot more to consider than supporting your own future. If you want your business to last (and potentially support your family in the future), you have to consider how the business would function in your absence and if it’s equipped to continue operating at its fullest capacity.
Consider this: if you can no longer work or you pass away unexpectedly, what happens to the business? Would you or your family close up shop? Would you try to sell it for inventory or assets, or as a total acquisition? You might want to pass it on to a partner or a family member. Either way, each of these options requires intentional planning to ensure the process plays out smoothly and you have the right resources in place.
If you have key employees with vital roles in the company, you’ll want to consider how to keep them engaged and committed to your business over time. You can establish attractive benefit packages to promote retention, and safeguards to support your operations if they decide to leave. But without a plan, you can lose key people and suffer secondary losses (time spent searching for a new hire, clients who decide to leave, lags in production) as a result.
As many elements as there are to a business’s finances, it’s not often one particular aspect that throws a wrench in the plan—it’s the failure to tie everything together cohesively.
I have two clients who own multiple business entities together, and before working with our firm, their CPA and attorney had never spoken to each other (despite having offices barely five minutes from each other). This might not seem like an issue on the surface, but when our firm brought everyone together to review their plan, we noticed there were discrepancies between the way they filed taxes and who was documented as the primary owner in their operating agreements. These details had been on the books for years, and likely would have continued to exist had we not brought everyone together to review the pieces as a whole.
This is the most important part of planning for a business owner—you need someone to oversee the broader picture and coordinate each piece so everything and everyone is serving your best interest cohesively. You might have several professionals in your corner, but they generally won’t communicate or collaborate unless someone brings them together.
We caught the discrepancy in my clients’ plan in time, but those seemingly minor details could have caused major issues if one of the owners died unexpectedly and arguments arose about who owned what. That’s why having an advisor create a comprehensive business plan is so important—we can’t replace your attorney or accountant, but we’ll make sure everyone is on the same page and doing what’s best for your business.
These are some of the major points business owners need to consider, but everyone’s situation is different. If you’d like to review your financial plan and find out what you might be missing, we’d love to guide you through the process— click here to schedule a consultation. To read about what you should consider when planning as a retiree, read Part II of this blog series.
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