November 29, 2017
November 29, 2017
Investors often enjoy the excitement that comes with a strong bull market as we watch our investment portfolios grow. During these times, we aim to maximize the value and performance of our investments. And when bear markets hit, we seek to protect these assets.
Whether we're dealing with expansion cycles or recessionary risk cycles, we're constantly seeking to build, protect and optimize our portfolios. Whether it's stocks, bonds, real estate or other private investments, experienced professionals such as CPAs, wealth managers, investment bankers and attorneys are utilized to help investors navigate through these cycles. But when it comes to how business owners manage their largest investment -- the closely-held business that they've built -- they often do not seek the same necessary professional help and guidance needed to accomplish their goals.
As a wealth manager and investment adviser over the past 25 years, I've developed and counseled a diversified clientele. I've had the opportunity to help a substantial demographic: the small business owner. One critical area I've discovered they need help with is business strategy and enhancement.
The small business owner often overlooks their most valuable investment for their retirement and their legacy: their business. Most business owners work tirelessly year-after-year to operate, sustain and grow their companies, but they may not be spending nearly as much time examining planning and strategy. Implementing proper business strategy, in alignment with their goals, will help them capitalize and increase the value of their largest investment.
One man's stumbling blocks to selling his business
A prospective client recently came to our firm looking for guidance with a business succession strategy for his food and beverage distribution company, which he has been operating for over 25 years as the sole owner. The company is very profitable, with high margins, the owner is in his late 60s and enjoys a comfortable lifestyle. However, he's currently working about 45 hours a week, and he's concerned about the future of his business if he dies or becomes disabled. Since he's feeling the fatigue of his age and yet still working hard, he wants to sell his business and retire.
I discovered that this business owner is facing three common challenges that will diminish the value of his company when he sells:
Some disturbing small business stats
Take a look at these statistics from the Exit Planning Institute, a provider of education and tools for exit-planning professionals, keeping in mind that one's business is typically the largest asset in a small business owner's investment portfolio:
Three vital plans to put into place, for your own sake
Considering that in many cases a privately owned business is a self-employed person's largest asset, many of these owners are failing in three of the most important areas of planning and running the business. Smart planning in these three areas can help with their retirement goals and the transfer of wealth to future generations or family members:
With mindful planning, small business owners can greatly reduce or eliminate the challenges that are faced during the inevitable times of transition. It can also help enable the business owner to maximize their investment to its fullest potential. With focus, diligence and a proper strategy, we have the ability to achieve a comfortable, rewarding retirement. One that will fulfill not only our hopes, goals and dreams but also enable us to leave a legacy, if planned properly, for our families, heirs or our favorite charities into future generations.
This article was written by Founder, Nicholas Giacoumakis, President, Retirement Group Inc., New England Investment &, Cepa and IAR/Investment Adviser from Kiplinger and was legally licensed through the NewsCred publisher network. Please direct all licensing questions to email@example.com.