Importance of a financial plan for a business owner

Importance of a financial plan for a business owner

April 28, 2013 by Andrew Rogerson in Management and Planning, Money 2.0 radio show with Andrew Rogerson

Importance of a financial plan for a business owner. Most business owners spend a disproportional amount of time running their business to make sure it’s successful. Similarly, most business buyers, especially those buying a business in their late 30’s and 40’s are doing so because they believe they can earn more as a business owner than as an employee and therefore set themselves up for when they plan to retire. In my opinion, too many business owners know how every nuance of running their business but what they lack is an understanding of what they should do with any extra profit they make 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 as they too need to take profits off the table and diversify their risk by investing their profits or money in other investment strategies.

The guest for my radio show on April 23, 2013, was 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 about 35 minutes together on the show and during that time I was able to ask him a number of questions.

My questions and his answers included

1. If you are sitting down with a new customer or client for the first time, where do you start?
2. Very briefly, what are the different components of a good financial plan?
3. What are the elements or strategies of a good financial plan?
4. What is the financial planning process and explain it to me?
5. How does a good investment strategy complement the financial planning process?
6. Why is choosing an age you want to retire a key part of any investment strategy?
7. What does it cost to invest in an investment strategy?

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 unavailable to employees. Some of these options include making these investments available to the employees so there is a need to be careful that the laws are understood and followed.

Rich and I also spoke about the importance of a business owner getting a business valuation before they move into the many steps to sell their business and divest themselves of their business. Too many business owners have a false belief about the value of their business. Getting a business valuation helps set expectations and makes sure the seller understands the strengths and weaknesses of the business and its chances of selling. Also, if you a business owner that is working with me to sell their business, an extra step I’ll take is to try to get third-party finance identified so if a qualified potential buyer has the skills, credit score and down payment to qualify for third-party finance, the seller is not forced to carry a large sellers note.

Rich and I also talked about the steps a business owner should take if they receive a large 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.

There were many other questions I was able to ask during my conversation with Rich. If you would like to get more information about putting together a well-rounded financial plan and investment strategy, you can give Rich a call on (916) 973-1741 or visit him at his office in Lyon Village at 2580 Fair Oaks Blvd. Suite 16, Sacramento, CA, 95825 or across the road from Loehmann’s Plaza.

If you prefer to get some more information, you are welcome to listen to my conversation with Rich on my radio show and you can do this by clicking on the following link – Rich Frank of Edward Jones.

If you have questions about valuing a business or getting an SBA loan, please complete the contact form and Andrew Rogerson will contact you or give me a call on 916 570-2674.