Managing Wealth in Small Business

How to Managing Wealth in Small Business?

Despite mounting financial concerns, only one-half of small business owners use a wealth manager or financial advisor. A busy schedule and ingrained habits are to blame for mounting financial concerns for small business owners.

Management

  • In a family owned business, Business Succession Planning within the context of a family estate plan requires bringing an estate planning attorney onto the team who has expertise in transferring business assets to future generations in the most tax efficient manner.
  • If the family wants to keep the business or specific assets in the family for future generations, dynastic planning may be involved. We have seen many businesses forced to sell because of improper estate planning.

  • Business owners don’t have much time to spare, and they tend to stick with financial advisors who have been around from the beginning, like an insurance agent.
  • However, professional help with their capital needs in difficult financial times has become increasingly important for small business owners.
  • This all-your-eggs-in-one-basket approach can be dangerous for a variety of reasons.
  • There is a risk level to it. If the business fails, your wealth goes away.
  • The main reason so many businesses don’t make it is they don’t have enough cash in tough times.
  • Banks aren’t lending and cash is king, but many owners don’t know how to budget or control cash flow.
  • Businesses also fail to succeed because they are successful and their sales growth outstrips their ability to generate sufficient working capital to fund the growth. The cash crunch for business owners has been particularly acute since the financial crisis of 2008.

Retirement

  • If you are a small business owner, much of your wealth is trapped in your business.
  • The problem is in order to diversify that wealth, you have to remove that wealth from the business, and, in essence, remove some of the lifeblood from the business.

  • For small business owners, it’s not that they don’t want to save for retirement outside of their businesses.
  • Their priority is to plough earnings back into the business to keep it growing, so they rarely pay themselves a big salary.
  • Taking money out impinges on growth prospects and it can make it hard to maintain the business.
  • Another reason for the shortage of retirement savings could be that many businesses are fairly modest.
  • Entrepreneurs need to take time away from working in the business spend more time working on the business.
  • A key question for business owners, whether from a retirement perspective, a potential sale, or even the continued operation of a business is “Does the business run without me?
  • If the answer is No, there could be difficulties valuing the business, finding a buyer or even generating income from it when you’ve left or are less active in it.
  • Once you know what income might be, then you can back into how much you need to save.

Target

  • Younger business owners are nearly twice as likely to use an advisor than not.
  • Younger owners are more receptive to working with outsiders.
  • They acknowledge that there’s a lot they don’t know.

  • Female business owners are particularly likely to use financial advisors, in part because they are more likely to be first-time business owners.
  • Women business owners are generally more worried than their male counterparts, about the day-to-day finances of the business and with the debt load carried by their business.
  • But business-owners nearing retirement do represent a fertile market for advisors.
  • Retirement savings and insurance products were services most often sought by these business owners.
  • What’s more, owners working on an exit strategy use an advisor by a margin of three to one over those who don’t, and owners working on a business-ownership strategy use advisors by a two to one margin.

Setting unrealistic goals will not only cause you unnecessary anxiety, but can also hamper your success and the ability to meet other goals. More importantly, know your list of things to do and goals will never be finished and that it’s ok. As you attain your goals and cross items off your to-do list, you’ll also be adding new items. Consider booking a free one-hour consultation session with our experts at HyperEffects to help you understand basics of anxiety-free marketing and setting up business, strategizing your goals and letting an advertising company save you the anxiety of making a website, running promotions and maintaining media and publication  for your company.

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