Most business owners spend a disproportionate amount of time managing their business to ensure its success.
Similarly, most business buyers, especially those in their late 30s and 40s, are doing so and looking to the future. That is, they believe they can earn more as a business owner than as an employee, and therefore set themselves up for retirement.
In my opinion, many business owners know how to run most aspects of their business, but what they often lack is an understanding of how to utilize any extra profit they generate during good years. Successful gamblers understand you won’t win every time you place a bet, and therefore, it makes sense to take money off the table when they are on a winning streak. This equally applies to business owners. When they have good years, they too need to take profits off the table and diversify their risk by investing their profits in other investment strategies.
The guest for my radio show on April 23, 2013, was Rich Frank.
Introducing Rich Frank.
Rich is a financial planner with Edward Jones and has been offering financial investment advice for over 14 years. Rich and I spent approximately 35 minutes together on the show, during which I had the opportunity to ask him several questions.
My questions and his answers include:
- If you’re meeting with a new customer or client for the first time, where do you start?
- Very briefly, what are the different components of a sound financial plan?
- What are the elements or strategies of a sound financial plan?
- What is the financial planning process, and explain it to me?
- How does a sound investment strategy complement the financial planning process?
- Why is choosing an age at which you want to retire a key part of any investment strategy?
- What does it cost to invest in an investment strategy?
Diversifying risk
Part of my conversation with Rich was about strategies a business owner should consider as part of their plans to diversify their risk. Rich said that the strategies a business owner would employ are different from those of an employee. Business owners have a set of tax deductions that are not available to employees. Some of these options include making these investments available to employees, so there is a need to ensure that the laws are understood and followed.
Rich and I also spoke about the importance of a business owner obtaining a business valuation before undertaking the various steps to sell their business and divest themselves of ownership. Many business owners hold a false belief about the value of their business. Obtaining a business valuation helps establish expectations and ensures the seller understands the business’s strengths and weaknesses, as well as its chances of being successfully sold. Additionally, suppose you are a business owner working with me to sell your business. In that case, an extra step I’ll take is to try to identify third-party finance. If a qualified potential buyer has the necessary credit score, down payment, and credit to qualify for third-party finance, the seller is not forced to carry a large seller’s note.
What does a business seller do with the money from selling their business?
Rich and I also talked about the steps a business owner should take if they receive a significant cash component from the sale of their business. We concluded our conversation by talking about the steps a business owner should take if they plan to pass the business on to their children rather than sell it to a third party.
If you would like to learn more, you are welcome to listen to my conversation with Rich on my radio show. You can do this by clicking on the following link: Rich Frank of Edward Jones.
For more immediate assistance with purchasing a business for sale, you are welcome to contact Andrew Rogerson, a certified business broker based in Sacramento, California, who services the entire state. Call Toll-Free at (844) 414-9700 or email him at support@rogersonbusinessservices.com.
Further reading
The Financial Plan Benefits When Selling a California Business