Most small business owners need help. They often get so caught up in the day-to-day routines of running a company that they fail to do any real planning for the future, according to bank advisors who have small business clients. Entrepreneurs are risk-takers, they’re optimistic and they usually have boundless energy. All prerequisites for the path they’ve charted for themselves. But they don’t plan well, surprisingly. In fact, according to advisor Josh
Goodridge, most of his small business clients will tell him that they’ll be “doing this until they die.” Enthusiasm in spades, but not the best mind-set for business planning—or their own succession planning. Goodridge, who works at Cuba, Mo.-based Peoples Bank, says one of the most important things he can do to help small business owners is to paint a realistic picture of the future and not let them put their heads in the sand. And as a small business owner himself—he co-owns a restaurant/brewery—he has a bird’s-eye view of their challenges. “They’re running 24/7 just to keep up. Just trying to plan lunch with them is hard.” They need someone to constantly remind them of their long-term financial needs, Goodridge says.
They also often need help in calibrating expectations, notes Larry Gekiere, an advisor at Dallas-based Texas Capital Bank. “Nobody buys or starts a business because they think it will do poorly.” They often get too emotionally vested in the business and it becomes intertwined with their self-worth. He and his team spend time getting small business owners to view their companies simply as businesses, complete with an endgame. (Raymond James is the third-party marketer for Texas Capital Bank and Peoples Bank.)
But once a small business has achieved some success, the need for advice doesn’t subside. In fact, the same laser focus on day-to-day operations is prevalent even among longtime business owners. Gekiere had one prospective client who announced earlier this year that he wanted to sell his business in three weeks. Another client bought an existing firm that repairs airplanes, but the need for “juggling financial responsibilities” is still important.
That client, Kevin Kyser, had achieved success in business and his personal life by the time they met in 2011, but he was looking for an advisor he “could rely on as a quarterback” to handle his financial affairs.
Tim Self, an advisor at Sarasota, Fla.-based Insignia Bank, says many of his small business clients are challenged with staying diversified since the majority of their net worth is wrapped up in their company. To get around that, Self suggests diversifying outside their own industry. (LPL is the third-party marketer for Insignia Bank.)
Retirement planning is the big challenge, he says. He advises all his small business owners to plan like any other client who has a regular job. Save and invest enough money through the years instead of planning on a big payday from selling their company at their end of their career path. “They should consider the business to be the icing in the cake,” Goodridge says.
They can have their cake and eat it too, but only if they take a long view and plan with that in mind.
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