Here are more characteristics and action plans that successful small- to middle-market businesses have in common.
In the previous blog, I spoke about 6 common characteristics shared by successful companies and their owners. Here I am bringing you 6 ADDITIONAL characteristics I have observed to work together in creating a success business.
The following are not intended to be all-inclusive and are not specifically in order of importance or priority:
- Qualified Retirement Plan
- Risk Management
- Business Exit Strategy
- Estate Planning
- Retirement Planning
- Wealth and Personal Financial Planning
QUALIFIED RETIREMENT PLAN –
Because of the : 1. Current income tax deduction 2. Deferral of taxable income recognition and 3. Asset protection nature for most contributions to Qualified Retirement Plans, e.g. pension/profit sharing, 401k, SEP and Simple plans, clients make every effort to adopt a plan that results in the largest affordable contribution amount for them, while meeting the minimum coverage/participation and vesting rules for their eligible employees. It is not unusual for clients to have a majority of their liquid savings net-worth in these types of retirement accounts.
RISK MANAGEMENT –
Commonly considered “the process of analyzing exposure to risk and determining how to best handle such exposure”, proactive companies and their owners are constantly evaluating their alternatives for mitigation. This normally includes forming limited liability entities for operating businesses and advancing estate planning, purchasing various forms of insurance coverage, making certain all important contract agreements are in writing and up-to-date, and the other characteristics shared by successful companies and their owners mentioned herein have been evaluated and where necessary implemented.
BUSINESS EXIT STRATEGY –
One of the objectives for many business owners when they are ready to fully or semi retire, is to seek a succession plan for their business under favorable price, tax and financial terms. Although seemingly premature, clients who begin evaluation of succession plan alternatives and educate themselves about their industry’s business merger/resale market 1 to 2 years preceding the sale event are much better situated to sell optimally. As an exit strategy begins to take on more importance, clients being to consult with us, and in many instances we assist them with engaging a suitable business broker or investment banker.
ESTATE PLANNING –
Estate planning, the process of planning how to preserve your assets during your lifetime and for your heirs at the time of your passing, is not just for the wealthy. Everyone should engage in some form of estate planning. After working hard for many years building up a business or career and accumulating assets, you should make sure those assets will not be unnecessarily diminished by costs and taxes but are preserved for your intended survivors.
Proper estate planning can help to increase the size of your estate4, whether large or small. Its basic purposes are to 1. Choose how your property will be distributed after your death and to whom, 2. Help assure your property will be distributed in an orderly and efficient manner and 3. Minimize costs, fees and taxes.
RETIREMENT PLANNING –
Because of the tumultuous financial markets over the past several years and the uncertainty of future social security and medicare benefit payments, clients are discussing, evaluating, planning and studying their retirement alternatives, options and needs with me more carefully than ever before. One common element is business owners, and many others, are realizing the financial and quality of life benefits in continuing to work full or part-time beyond their original contemplated retirement age. Clients, both retired and 3 to 5 years from their planned retirement date, regularly request annual or bi-annual meetings for a comprehensive discussion and review of their retirement circumstances.
WEALTH AND PERSONAL FINANCIAL PLANNING –
Building and preserving personal wealth requires careful, disciplined and recurring attention. It requires comprehensive financial planning and normally includes weaving together some, or all, of the aforementioned common characteristics shared by successful companies and their owners. The primary purposes are to analyze your assets and sources of retirement income, identify your retirement income needs, review estimated shortfalls or excesses, and identify the best way to continue saving or preserving for your retirement given your personal financial situation and risk tolerance. Other issues frequently dealt with are protecting earned income sources during ones work years, paying for college education and leaving a legacy for their heirs.
IF YOU WOULD LIKE TO DISCUSS OR NEED ADDITIONAL INFORMATION OR CLARIFICATION REGARDING ANY OF THE 6 CHARACTERISTICS IDENTIFIED ABOVE, PLEASE CONTACT ME AT YOUR EARLIEST CONVENIENCE.