For many businesses, the “new normal” brought about by the COVID-19 pandemic seems likely to continue well into 2021 and beyond. From supply chain interruptions and shelter-in-place orders to the uncertainty associated with a new presidential administration, businesses must remain nimble to adapt and thrive. But what steps should business owners be taking now to secure their own (and their businesses’) financial futures? Read on for three key New Year’s resolutions for business owners who want to optimize current growth trends while planning for the future.
Revisit Your Retirement Plan–and Exit Strategy
Business owners know that their retirement plan is a little more complex than turning in their final two-weeks’ notice. Not only do you need to figure out which retirement funds or assets will provide you with regular cash flow in retirement, but you also need to implement your exit plan from your business.
As we noted in December 2020, a full 49 percent of business owners lack any sort of transition plan—and this lack of preparedness can have an even greater impact on a business that’s already dealing with pandemic-related challenges. Many experts recommend beginning the CEO succession planning process around four to five years before an anticipated retirement. This means identifying and developing internal candidates, evaluating the strength of the overall management bench, and creating assessment tools to select the top candidates. Succession planning will eventually culminate in the formal transition, a process that will ideally begin around nine to 12 months before the CEO’s planned retirement.1
Members of our team have been trained as Certified Exit Planning Advisors (CEPAs). This allows us to help position you and your business to be ready for your exit with our Value Acceleration and Transition Services. These services help split the exit planning process up into three steps: Discovery, Preparation and Decision, which work together to help make your transition as smooth as possible. Our team works hand-in-hand with CEOs and business owners to get to know the ins and outs of their business. By evaluating financials and benchmarking the business value we can help you understand where you are and how to proceed through the exit planning process. We then turn our plan into action by delivering and executing your action plan to your team. Then, you and your advisor will make a number of operational, personal and financial changes to your business to help boost its value. Now is the time to be brutally honest with yourself to reflect and come to a conclusion about the future for you and your business.
For CEOs and other business executives, transition and exit planning can go hand-in-hand with one’s own retirement. Your succession plan may include an option to receive a regular stipend from your business for a certain number of years after retirement; in other cases, you may need to decide how to invest a lump sum payout. Penta Wealth Management can work with you every step of the way.
Evaluate Your Will and Estate Plan
It can be easy to put off executing a will or creating an estate plan. After all, no one wants to think about their untimely death, and the potential for intra-family squabbles can make estate planning an uncomfortable and emotional topic. However, it’s crucial for high-net-worth individuals and business owners to have some sort of written estate plan.
For business owners and corporate executives whose assets are often diverse and tough to appraise, a comprehensive estate plan becomes even more important. Not only will you want to distribute your assets to your loved ones, but you may want to provide instructions to help select your successor or an interim leader—in tandem with the business exit plan discussed above.
If you already have an estate plan, it’s a good idea to revisit it periodically. Circumstances in your life may have changed—for example, you may want to bequeath some assets directly to your grandchildren instead of dividing them only among your children. You may want to change the charities you’ve named in your will, add additional ones, or set up a charitable remainder trust.
Check Up on Your Investments
For many investors, 2020 was a banner year despite near-constant turbulence. All three major stock indices closed at record highs on the last trading day of the year, while cryptocurrency Bitcoin surged nearly 300 percent over the course of 2020. This can be great news for business owners pursuing expansion, as well as those pursuing a retirement plan.
As every trading platform disclaims, “Past performance is no guarantee of future results.” And predicting the movement of the markets is a particular challenge in 2021, with a new administration pursuing an aggressive agenda while many of the reverberations of COVID-19 (like sustained high unemployment rates, evictions, and supply chain disruptions) continue to emerge. It’s important not to coast on a banner year going forward, particularly if you’re likely to need some of these funds soon. For many business owners, now may be the time to reevaluate your asset allocations or consider converting some high-yield investments into cash.
Whenever you need a second opinion on your investment strategy, estate plan, or business succession plan, look no further than Penta Wealth Management. Our experienced advisors can provide you with personalized planning and investment guidance, giving you the direction you need to achieve your professional, financial, and personal goals. Just give us a call at 888-447-3682 or send an email to info@pentawm.com to schedule a call with one of our advisors today.
