Napolitano looks at money.
Entrepreneurs’ lives are frequently defined by their business. Business owners are typically smart, hard driven people with their eye on one thing only - SUCCESS. This can make it tough to separate their personal lives from their business lives. There are six common missteps, which if avoided, can make wealth planning more effective.
It can take 24/7 dedication to launch and grow a business to significance. However, there is life beyond your business. Developing a work-life balance is healthy, and can add vigor to your life, and hence your business. Don’t wait for something tragic, like an illness or the loss of a loved one be your wakeup call.
An unrelenting focus on business growth may cause an imbalance to your assets, liabilities and cash flow. Cash flow is the first to make noise. During the start-up phase, sweat equity, or working for little to no pay is common. Have adequate reserves and budget a low cost of living to survive this stage.
Debt can become unmanageable, and minimizing personal debt will ease the pressure of taking money out of the business. Most businesses are better off with capital in the till rather than the overhead of a large owner’s salary. Many entrepreneurs also fail to know the consequences of personally guaranteeing business debt. This may affect your credit score and your ability to access financing for education or a home. Owners should also consider what happens to that debt if they were to pass away suddenly. Each loan is different, but this may cause the loan to be called and due in full upon the guarantor’s death.
The balance sheets of many successful entrepreneurs can become lopsided when the business asset is the single largest asset. Just like you wouldn’t invest all of your retirement funds in only one company, your company shouldn’t be your sole investment. Business owners should look to diversify and invest in retirement plans, and other assets separate from the business.
Many owners fail to have a succession plan. All businesses have a responsibility to their employees and customers to have a succession plan. A plan includes many different parts. You will need a legal agreement, funding and an operating plan to continue without the owner.
Just because you love all four of your children does not mean that all four should be the owners when you retire or pass. Talented people and key employees based on merit, not bloodline, become owners. There are many ways to equalize the estate of an entrepreneur for your children not involved with the business without compromising the businesses ability to survive beyond the owners passing.