When we talk to business owners, they usually tell us that their business is their pension. Of course, this may be true, but it can be notoriously difficult to quantify this since a business will only be worth what someone else is prepared to pay for it.We apply a bit of financial science to the process of a business exit strategy through what we call Lifestyle Financial Planning.Plan when you want to retire from your businessWe work with many business owners who work hard and earn a decent income. However, there will come a point when you will want to retire. You need to think about this well in advance of your retirement date, since you will need to start preparing your business for the transition and possible sale. It can be common for business purchasers to require that the selling party remain in the business for some time after the sale.Think about what your retirement should look likeWe work with clients to plan their lifestyle expectations, so they can then work out how much is enough to live the life they really want, and never run out of money. Through comprehensive financial planning we can work with them to understand how their financial decisions will impact on their future desired lifestyle. It is important to think about how you want to structure your retirement, because many of the decisions you take now cannot be reversed.How much is enough?Once you understand what your lifestyle goals are, you can then assume how your income, assets and expenditure will change over time. This can be put together to work out how much you might need to sell your business for when you actually sell. Or as an alternative you may want to stay on in the business in some capacity and continue to receive an income. Financial planning can help you to work out how much that income needs to be.Work on the businessOnce you know how much the business needs to be sold for, you can then work on the business itself to get it into the state needed to be sold. We work with business advisers such as coaches and accountants who help their clients work on their businesses to get them into shape for a sale. We find that once you know the amount you need to generate from your business sale, the pressure is off. if you get an offer which meets your expectations then you can take it.Manage your financial futureOnce the business sale has taken place, you need to manage your assets and investments to ensure that you never run out of money. This means regularly reassessing your financial plan and managing risks with your investments.Your business sale should be part of your general financial planning and is only one part of the overall picture of your lifestyle.
It’s the top of the new year and besides making New Year’s resolutions to lose weight, stop smoking, eat healthier, etc., it is time to prepare a good personal financial plan. Whether you are a young couple, an entrepreneur, an executive nearing retirement, a divorced woman after the divorce or a senior, a financial plan is essential to your personal financial well being. After all, it is obvious that you cannot rely upon the government to help you out over your lifetime, especially as the average life spans are growing longer than those of the previous generation and the federal government has a huge deficit that needs to be managed. The reality is that no one can take better care of and watch out for your financial health but you. Just as no one can lose the weight but you, no one can cause you to eat healthier but you, you are the only one to protect your future with your unique financial plan. If you let your financial plan go to chance, chance is what you will get.If you have been financially savvy for some time, it may be that you are able to do your own personal financial plan. However, even if you are savvy, it helps to use a professional certified financial planner to test your financial plan against your core values and what you are attempting to accomplish. After all, everyone tends to be at a different time in their life. For instance, the goals of a single parent with minor children will be substantially different from that of an entrepreneur. As we progress through life and one goal may be accomplished, there are other items that come into play as a goal, i.e. saving for retirement, taking care of ailing parents, saving for a vacation home, starting a new business, to name a few. A certified financial planner has software available that can predict what you might have to set aside to provide a certain income stream for you at retirement, or what amounts of money you might have to put aside for college for children.Even beyond the use of the financial software, it is helpful to use a professional to sort through what your core values are, what goals you may have (financial and otherwise) and to prioritize those goals. Sometimes that is difficult to do by yourself, as you may tend not to be objective about certain issues and it may then be good to talk with a financial planner to sort through all of your objectives.While we cannot predict the future, it is important to prepare a written plan each year that sets forth your goals, both financial and otherwise. Each year at the beginning of that year, you can do a review of what you have accomplished from that last year and what has to be changed from the last year’s plan, as life has a way of throwing “curve balls” at us, which requires that we change that financial plan. You will be in a better position to change direction if you need to, if you have already been executing against an existing plan.What’s your financial plan?