At a certain point, a business owner’s gut is no longer sufficient for making critical financial decisions. As business expands and operations accelerate at a faster pace, owners begin to lose grasp over the many areas they are tasked with managing. Of course, this to no fault of their own. At RiversEdge Advisors, we see this happen with new business owner clients all the time. They are too involved in the business to see the overall dynamics, growth begins to outrun their capacity, and unfortunate outcomes start rolling in.
It is at this critical juncture that they need someone to make sense of their financials—and fast! They need someone who understands (1) their personal financial needs, (2) the economics of the business, and (3) ultimately what changes need to me made to keep things running and scaling smoothly.
As business-focused financial advisors, we have the skills and expertise to peel back the parts of the onion where you are most likely to discover gaps in personal and professional financial management. Not only can we handle dozens of the day in and day out financial responsibilities of your business, but can help you regain control of the bigger, long-term picture.
Year-Round Tax Planning
It doesn’t take business owners very long to realize that tax planning is not a one-time event. While the tax code affords business owners many tax-saving incentives, it is voluminous and complicated. Many of the business and financial decisions you make every day have tax implications, making tax planning a constant responsibility. It should always be top of mind when making critical business decisions.
Your financial advisor has a 360-degree view of both your personal and business tax situations, offering the best perspective on how to optimize your business for maximum tax advantages, including:
- Planning equipment expenditures for maximum Section 179 and bonus depreciation deductions
- Maximizing business deductions
- Determining the most tax-efficient business structure
- Limiting liability
- Staying current with tax law changes
Most business owners understand the necessity of insurance as it relates to protecting their assets against liability claims. However, liability and property insurance coverage won’t help you when you lose a key employee due to a disability or premature death. It also won’t help should you, the business owner, be unable to work due to a disability. And, if you’re in business with a partner, your business or your family’s financial security could be threatened should you or your partner die prematurely.
Your financial advisor can help you find the most efficient ways to add critical protections for these and other contingencies, putting in place plans such as:
- Key employee protection plans
- Disability income and business overhead protection plans
- Business continuation and buy/sell plans
Creating an Exit Strategy
Eventually, you will leave your business. The question is whether you will be able to do so on your own terms, producing the best outcomes for you and your business at large, or if the terms will be decided for you based on circumstances you didn’t account for ahead of time. Regardless of whether you plan on running your business for a few more years or a few more decades, you need an exit strategy that includes:
- A target date for the exit
- A plan for maximizing the value of the business
- A determination of how to exchange the value of the business for cash in the most tax-efficient manner
- A determination of whether the business is to be transferred internally or externally
- A plan for ensuring the continuity of the business during the transition to new owners
- A determination of the role, if any, you will have with the business during the transition and after the transfer
- A plan for ensuring your and your family’s financially security
As you can see, there are many moving parts in an exit strategy involving professional advisors from the financial, legal, tax, and business planning disciplines. Your exit strategy should revolve around what you want to accomplish financially for you and your family, making your financial advisor the appropriate person to coordinate these efforts.
Many business owners look upon the eventual sale of their business as the answer to their retirement security. But, if they neglect to do the essential planning to determine the most tax-efficient way to take income from the sale or calculate the optimal spend-down rate of their capital, they may not get the outcome they need or want.
Working with a financial advisor, you will have to consider all aspects of your financial future, including assessing your options for taking cash out of the business (all-out or deferral), including all tax implications. Also, you will have to develop:
- A post-business capital spend-down plan based on available capital
- An investment strategy designed to generate sufficient income while growing your assets
- A risk management plan to protect against risk exposures, such as death, disability, personal liability, life longevity (the possibility of outliving your income and critical illness)
- An estate plan for preserving and transferring assets with minimal cost to your family
A comprehensive plan of this sort requires a team approach and a collaborative effort among advisors from different disciplines, such as a CPA, estate attorney, risk management specialist, and investment advisor. Your financial advisor is best positioned as the team “quarterback” to coordinate the planning and implementation of all aspects of your plan.
Choosing the Optimal Retirement Plan for Your Business
Business owners who want to establish a retirement plan for the benefit of themselves and their employees have several options. Which option is best for you and your business will depend on several factors, including your age, earnings, retirement time frame, and the number of eligible employees. A financial advisor can help you weigh your plan options based on these factors alongside your personal financial objectives. At RiversEdge Advisors, in particular, we partner with BHI Insurance Group to offer you and your employees the best possible investment options, financial education, and fiduciary care.
Once you’ve selected your plan option, we’ll help you choose a range of investments that can be made available to you and your employees. We’ll then make periodic visits to your workplace to conduct retirement planning and investing workshops. Working with you and your employees, we can help develop asset allocation strategies based on individual retirement objectives and appropriate risk tolerance levels.
The more significant challenge for business owners is that the business and financial environment is in a constant state of change, which can leave you in a state of constant reaction. Instead of reacting to changes after they occur, we aim to put you on the offensive, proactively preparing you and your business for any contingencies that may arise along the way.
Delegating Business Tasks to Your RiversEdge Advisor
At RiversEdge Advisors, we like to believe that our services help to create the future you seek by taking some of the most pressing financial tasks off your plate. Through education, guidance, support, and ongoing monitoring, we provide you confidence and peace of mind so you can remain laser focused on expanding the business you’ve worked so hard to build. Know that we’re here to guide you, help you, and alleviate any personal and professional financial concerns you have along this crazy journey of entrepreneurship.
If this type of advisor relationship sounds like a good fit for you and your business, we encourage you to reach out. Take a tour around our site or schedule a complimentary Discovery Call with us today. We look forward to learning about you and your business.