By: Darrel Hackett, President, BMO Wealth Management – U.S.
One of the best parts of my job is being able to work with business owners, all of whom have great passion for their companies and a clear drive to succeed. When it comes to their companies, most have no problem creating detailed business plans and managing complex balance sheets. However, there is one area where many entrepreneurs aren’t as diligent: taking care of themselves.
Successful business owners can often be so laser focused on their companies that they might not pay enough attention to their own needs, whether it’s financial or personal. It makes sense – business ownership can be all-consuming – but it’s important to recognize that you can do both. The key is to be as disciplined with your personal life as you are with your company. If it’s hard to focus on both individually – and it can be – then consider integrating personal and professional planning together.
The first step is to think about succession, both for your business and for your home life.
It can be hard to think that far ahead, but it’s likely you want to see all of your hard work pay off one day. Otherwise, why are you putting in so much work? Seamlessly handing off the business you created, while reaping your rewards in retirement is what most entrepreneurs want at some point in their lives.
The key is considering the professional and personal in tandem – you don’t want to sell your business and then be left wondering what to do next. Even if retirement is far off, it’s a good idea to start planning now.
Create short-term goals
When it comes to the business, you’ll want to start getting the company to a point where someone might be interested in buying. You may have to find new markets or increase your customer base to make your organization more enticing.
On the personal side, start thinking about how you might want to live your life as the business grows. Do you want to be involved in every facet of the company? You may want to hire someone who can take it to the next level and give you some room to breathe.
Having an idea of when you might want to sell your business and to whom is critical for an eventual sale. Look at your competition – would they want to buy? Or maybe a family member or employee can take over?
At the same time, think about what you’ll want to do after the sale is complete. Some buyers want former founders to stay on – would you consider working for someone else for a while? And when that ends, what’s next? Do you want to start a new business? Spend time traveling? What you do is up to you, of course, but start planning earlier, rather than later.
How much do you need?
Every business owner wants to sell for the right price. That price depends on a number of factors, so start putting together numbers now. If you don’t think you can sell for that price today, then you’ll need to find ways to increase your business’s valuation.
From a personal planning perspective, the sale price is an important consideration as you determine the kind of lifestyle you want in your post-working years and how much will be required to make that happen.
Consider company and personal finances
As you’re putting together your company’s financials, work on your personal finances as well. Thinking about where to invest company dollars? Give some thought to where you might invest your savings as well. Are your needs best met by a solution geared toward business owners, such as SEP IRAs, Simple IRAs and self-employed 401(k)? Or do you have different needs?
I often remind clients that at some point you may not want to be working endless hours building a business. There comes a time where you want to enjoy the fruits of your labor.
Planning for yourself, like you do for your business, is easier said than done, of course. But it can be done. I’ve seen it work time and time again. Be diligent, write things down, and make your non-working life as much a priority as your professional life. Spending the time will help give you confidence that your personal life is right on track along with your business.