Become a Trusted Delegate to Your Business Owners

Celebrating Small Business Month

Business owners have a full plate. They are managing their business, marketing their products or services, hiring and firing employees, protecting against competition, and worrying about inflation, the cost of doing business, and finding capital. The good news is according to the US Chamber, 63% of small business owners (under 100 employees) report their business is in good health1, which has remained stable since Q2 2022. What they may be putting on the back burner is protecting this business and well as themselves. This is a great area for professional help. Having an advisor act as a business owner and part-time CFO, allows the important topics of succession planning, cash-flow management and retirement planning to be delegated to a trusted advisor.

Succession Planning

They have built the business, they have grown the business, and have invested time, money, and effort in the business. How do you help them exit the business? There are many exit strategies that a small business owner can consider: liquidating and closing the business, family succession, selling the business to a 3rd party, bankruptcy, and taking a company public. Exit planning or succession planning starts with business owners answering some questions:

  • Are you going to liquidate and walk away or sell the business?
  • Who will manage/own your business? How will you select and transition to the next management? How will you attract the next level of key-employees?
  • How to transfer the business to family or through a sale to employees, or to broker the business to a 3rd party?
  • How can you create liquidly to fund your retirement?
  • Can you use life insurance to create the liquidity to fund the sale?
  • Do you need to equalize your estate to non-managing family members?

Their succession plan should look at all the tools available to create a customized plan that meets their goals for retirement, taxes, and leaves their business in the right hands.  Succession planning is a multi-year process, so start now. The successful plan will include retaining the institutional knowledge that makes their business great, as well as the liquidity to fund the retirement they have earned.

Some techniques to consider:

  • Protection
    • Key-man insurance: What would happen if the best employee dies? They need time to find a replacement, and assets to search and hire the new talent.
    • Disability Insurance for the owners: What happens if they get hurt? They need the assets to heal, or to protect their business and their family.
    • Buy-sell agreements: This is a way to protect the interests of the partners. The insurance creates the liquidity for the other partners to buy that portion of the business. Or does the business want your partners’ family to now be an owner?
  • Training and Mentorship
    • Creating a shared view of the future of the business to next generation of owners, to give peace of mind that the business will progress the way the owners envisioned.
    • Does the business have someone that can take the helm today that understands the owners’ goals? Mentoring the owner’s replacement by inviting them to your planning meetings.
    • Hiring a key employee: bring someone in to be prepared and trained to take the helm.
    • Create a strategic partnership: Is there partner/vendor/business that needs to retain the business/services in the future (so not to disrupt their business?) This could be the largest client (integration), or a supplier/distributor (new partner).
  • Funding the owners exit
    • When it is time to step down and retire? How will the business fund the owner’s retirement?
    • Does the next ownership have the assets to buy the business? If family is taking over, how are they going to pay?
    • Consider an Installment Sale, or use cash value life insurance to fund the exit.
    • There are many options that can meet the needs of the owner or owners. Start the discussion today.  

There is much to consider and being a trusted advisor. We have the responsibility to walk our business owners through the options and help the employees understand and prepare for their future as well. This is valuable to all. Start the conversation by discussing what the goals are with the business and what the business owner envision retirement to look like.

Cash-Flow Management

Business owners often concentrate on keeping cash on hand to cover operating expenses, employee insurance, and quarterly tax payments. Having too much in cash holdings is a risk if inflation is also a concern. Look to business liquid assets as you do for personal assets, in buckets based on need and time. The bucket approach for business owners is based on short-term needs, mid-term planning, and long-term investments.

  • Short-term bucket
    • This bucket will have the cash. The cash to make quarterly tax payments, cover payroll for 3 months (a goal), and make payments. Your payments are rent/lease, equipment financing and maintenance, life and disability premiums, and retirement plan matching.
  • Mid-term Bucket
    • The mid-term bucket may be different for each business, but let’s say this is for investments in the 3–5-year range. This may be business expansions, equipment purchase, capital improvements, investments for efficiencies, and software upgrades. Having the mid-term bucket enables the business to set aside a specific budget to allocate assets in higher return investments.
  • Long-term Bucket
    • The long-term bucket is the 5 years plus bucket. This bucket is assets set aside for long-term business goals, and long-term employee incentives. This can also be the bucket dedicated to employee benefits, retirement plans, and bonuses. Having assets in this bucket also enable higher risk investments based on the longer time-line dedicated to the bucket.


Retirement Planning

This seems like a topic many business owners have set-up and then forgot about. Retirement planning is not a crockpot. The business may have set-up the retirement plan with a payroll provider, then never looked at it again.

There are many ways to save for retirement for the business owner. Depending on the number of employees they have or if the owner is the only employee. There have also been many changes in retirement planning rules and programs over the last few years. You may consider reviewing your business owner’s current retirement plan, and compare to the current options available. There are many retirement providers out there that will handle most of the filing, and fiduciary responsibilities for you at very reasonable rates. Also, working with an advisor adds a new benefit for your business owners’ employees…access to you!  You can hold retirement meeting for employees, help them with saving and planning for their families.

Creating and running a business is work worth doing. Your owners have so much of the day-to-day to worry about that taking care of the business is all consuming. You have the power to be a delegate to your clients. Task them to work in their business as you work on their business. At the end of the day, providing for and protecting your clients, and their family is what we do.

Your TO DO list for your business owners:

  1. Set a meeting to discuss
    • Review the business’ retirement plan structure, fees, and features
      • When was the last time the provider held an enrollment meeting?
      • Met with the firms’ employees?
    • Review the owner’s retirement plan
    • Start the discussion on succession and exit planning

Start the Conversations Today!

To learn more about how you can engage business owners or would like to take a deeper dive on any of these topics, please reach out to me directly at 704-816-8034 or I am here and happy to help!

Rob Matricardi, CFP®, ChFC®, Head of Financial Planning

Rob Matricardi, CFP®, ChFC®, Head of Financial Planning

Having an advisor act as a business owner and part-time CFO, allows the important topics of succession planning, cash-flow management and retirement planning to be delegated to a trusted advisor.

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