SECURE THE FUTURE OF YOUR BUSINESS

iStock_000008233795Medium-man4-908x1024When it comes to your business, hoping for the best won’t ensure its future. Take Jack Stanton for example. Jack spent thirty years building a manufacturing giant, Stanton Solutions Corporation. However, due to the rigors of maintaining his company, he had little time for any personal financial and estate planning. Then, Jack died unexpectedly in a boating accident. All of a sudden, Stanton Solutions, a multi-million dollar manufacturing empire was facing an uncertain future caused by the loss of its owner and upper-most key executive.

What would happen to your business and your family should you become disabled or die unexpectedly? Do you have key employees for family members who could step in and run the company in your absence?

Business Continuation Basics

It is essential to the future of your business and your family to have a succession strategy in place. In order for your business to maintain continuity, you need to implement a succession strategy that coincides with your goals and objectives. Your strategy should be flexible enough to handle changes within the company and its related industry(ies). However, one of the keys to a succession strategy is determining who or whom your successor(s) will be.

Deciding on, and preparing a successor may require years to familiarize him or her with the finer points of the business. Thus, it is important to select a replacement as soon as possible in order to maximize the possibility of a successful transition. In smaller businesses, it is not uncommon for one or more family members to be at the top of the list of potential successors.

If you wish to pass your business on to future generations, you will need to make an honest assessment of the respective needs of your family and business, the qualifications of any interested family members, and whether the family and business would be best served by a continued relationship. Communication with family members is extremely important in order to better ascertain overall interest or concern.

You can prepare yourself by honestly evaluating and reflecting on the necessary components of a well-thought-out succession strategy. Here are some points that may require further elaboration:

• a thorough job description of each position, including details regarding areas of responsibility and delegation of duties;
• a management/organizational plan;
• Assuring the availability of cash to meet the demands of federal and/or state estate taxes;
• a list of potential successors to your ownership, taking every candidate’s job experience and academic background into consideration; and
• a mechanism to ensure extensive on-the-job training for the successor(s).

Other Considerations

A succession strategy may also include a buy-sell agreement funded by life insurance. More than likely, your successor may not have the cash, or the ability, to borrow at the time of successorship. Under such an agreement, the death benefit proceeds of the life insurance can be used to provide the cash necessary for a successor to purchase an owner’s share of stock in the event of his or her untimely death.

In addition, it may be prudent to explore how your unexpected disability could affect not only your plans for successorship, but also your financial well-being. Under a disability buyout arrangement, a disability buyout policy provides a successor with cash to purchase shares in the event of the owner’s untimely disability.

 

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Do a Quarterly Financial Review

470480e1gdwufwtHave you met with a professional and done a financial review lately? Every quarter I like to meet with my clients and go over any changes that have occurred in their lives. In many cases, the meetings give me the opportunity to find out what adjustments need to be made in their financial lives.

Life Happens

If there’s been a promotion, we may be able to increase the amount that is set aside for a rainy day or retirement. If there’s been a marriage or new birth, we need to make sure that family members have the right protection. If clients are no longer happy with their job, we need to map out a plan to find a new job or start a new business. Whatever the changes are, there’s a very good chance that my client’s financial life has been affected. I need to know that so we can tweak our prior plan.

Benefits of a Review

One of the major benefits that results from this quarterly review is that it helps my client feel comfortable letting me know what new things are going on in their lives. How? Some people may feel that they’re interrupting advisors. Scheduling a quarterly review sends a clear message that the changing circumstances are important. It also keeps the lines of communication open for events that happen between meetings.

One of the other benefits resulting from the meetings is referrals. Meaning, I get referrals for my business and my clients help those close to them. How? My clients have family, friends, associates and co-workers that need financial advice. Keeping the lines of communication open lets them know that they have a go to person in their financial life. Why not help others have that same peace of mind?

So if you’re working with an advisor, try to meet with them on a quarterly basis to go over what changes have occurred in your life and see how that can impact your financial life. Remember, the meeting may last a few minutes or hours but the impact can last a lifetime.

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Journey of a Business Startup

 

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Starting a business is a rewarding and challenging experience. It allows you to be very creative in the way you operate your business and the way you deliver value to your clients. Starting a business also allows you to take control of your life and determine how you will make your living. It does come with challenges, however.

Locating a Space for the Business

In starting my business I came across a number of hurdles I had to overcome. For starters, I had to search for the right location. Embarking on that process meant that I had to look at more than 100 locations in a number of cities to find the right place. I was looking for the area that had the right visibility, rent costs and potential customer income; all very hard criteria to match up. Yet it was work that had to be done as the cornerstone for building the business.

What is the Business Brand Identity?

Another challenge I had to overcome was brand name recognition. Now starting off I was working with a franchise company that had a number of brands under its direction. In starting out I had every intention of working with one of those brands. I did everything in the process up until actually sending the franchise fee to enter into the franchise as a franchisee.

Then one day the parent company decided to just simply discontinue the franchise I was considering. That was never in my business plans. Frankly I had never really thought about it and never even heard about something like that happening in the franchise world. Clearly I needed to do more research in that area.

So I had a decision to make: do something else or create my own brand name. That’s when I had a good conversation with a dear friend of mine. She had never believed in the overall franchise model in the first place, so she immediately said, “Go and do it with your own brand name.” That’s what I did.

Financing Challenges of a Business Startup

Still another hurdle was financing. After the mortgage meltdown, credit received from any bank is tough to get under the best of circumstances. For a startup business it’s just not going to happen. The banks have no cash flow history to go by so they are very hesitant to lend. They may make expectations if there is collateral to get if the business should go under. But those opportunities are few and far between. They want good credit, good cash flow and good collateral. Again, three things that a startup by its very nature doesn’t have.

So out came the credit cards, retirement savings and backup from family members. That’s when the feasibility of a marketing plan comes into stark focus. An owner will examine it a million times to see if there are any holes in it and look to plug them the best way they think. But it’ll never be 100% until the doors open.

These are just some of the challenges that a business startup will confront. Through these examples, you can see that starting a business is a series of challenging experiences which the owner or owners will need to overcome. Some of those obstacles will be obvious and anticipated, while others will be completely unforeseen. The best that a business owner can do is plan for both.

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