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Opposite attract: Why entrepreneurs need financial planning

Business owners need to think about their "after-business" life


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There's a business market where two philosophies clash: the old school thinking of the financial planning industry and the dynamic thinking of entrepreneurs. While financial planners will present a philosophy of saving money over time, entrepreneurs want to put their capital and time back into their business.

Marrying the two philosophies is not easy, and financial planning for entrepreneurs is different. While many business owners want to surround themselves with talented people to grow their business, it is just as important to hire a personal financial CFO to take care of personal financial decisions so business owners can focus on their business.

Why Plan?

Chase an entrepreneurial dream, but have a backup plan. Entrepreneurs have many different and multiple motivations for their decision to own a business. It may be the freedom not provided by big corporate America. It may be the ability to have unlimited creativity. With many of my clients that are business owners, it is almost always the potential for wealth without limits. In many cases, business owners are so focused on their business, they fail to plan for an “after-business” life. 

I have a friend that owns an IT company that provides IT support and data storage for small to mid-sized companies. It is a nice little business that did multiple millions in gross revenue at its peak. Unfortunately, the main service provided was disrupted a few years back by a new technology. It was called “the cloud”. After resistance by consumers in the beginning, the cloud was accepted.

Unfortunately for my friend, his business that was once worth millions is now worth a fraction of that. The plan to sell that big cash cow business at retirement was no longer an option. Fortunately for him, his business was able to evolve and survive on a smaller level. More importantly, he saved money and had a significant amount in a 401(k) which he offered through his company.

What’s Different?

Mindset with financial planning is the first hurdle for an entrepreneur. That is, recognizing the need and benefits of financial planning while having that passion for their business. Understanding that financial planning can provide wealth, tax advantage both to their business and personally, and a different perspective. 

Business owners need to have more cash on hand. Unlike the income of an employee in big corporate America, entrepreneurs are subject to income swings and cash needs more often. Entrepreneurs also have the ability to be creative with their retirement plans. They control what type of plan is offered and can tailor that plan according to their goals.

Retirement plans can be used to retain employees, attract employees, incentivize employees, and provide retirement savings for the owners. Business continuity planning is a key area missed by most business owners until it is too late. Unlike a typical household, estate planning for business owners is much more complex. Having the appropriate agreements in place is vital.

What now?

Denver has a growing start-up community, low unemployment, and a thriving economy. We will look back at this time as the good ole days. What entrepreneurs don’t want to happen is took look back at these days with regret as a time with an opportunity cost lost. Finding the appropriate wealth management advisor can save an entrepreneur time so they can focus on their business while securing the future.

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Kevin McNab

Kevin McNab is the founder and president of ACE Wealth Partners. Kevin has a Masters of Finance from the University of Colorado Denver and the Certified Financial Planner (CFP) certification. ACE Wealth Partners is an independent, fee-only comprehensive financial planning, asset and wealth management firm. Information contained in this article is for informational purposes only and should not be considered investment advice or recommendations. Advice may only be provided after entering into an advisory agreement with ACE. For more information, please go to www.acewealthpartners.com.

Kevin can be contacted at kevin@acewealthpartners.com or (303) 263-3235.

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