Women Business Owners - Do You Need to Plan!

Women Business Owners have some unique challenges, especially when it comes to planning for the exit of their business. Woman entrepreneurs can overcome these challenges and gain the knowledge they require to exit on their terms.??

We at Focus CPA Group Inc/SWAT Advisors can help many of her female business owner clients manage their wages and emotions towards money. Statistically, women are often left alone at the end of their lifetimes, and they need to learn how to plan accordingly to protect themselves and their loved ones.?

Business owners, as you know, most of your assets are tied up in the business. They don't have the cash that most financial advisors would really kind of go after, because they want to invest that cash. When we talk to business owners that is exactly what we do. We figure out what they have on their balance sheet. We figure out what they're planning for, what their goals are down the road. And then we build that bridge to get there. And we figure out what tools do we need in order to cross that bridge? What levers can we pull to close that gap? That's where the financial planning side kind of comes in for business owners.?

Then on the other hand along with financial planning one needs to focus on tax planning. This leads another aspect when planning an exit. Talking to them about investment approaches to building up a retirement fund financially. building business value, importance of good management in a company and how to build that management team critical to building a viable exit plan for which you worked hard.

Education should be the foundation of what business owners are doing for their business and for their personal life. And so, we build in conversations about exit planning from day one. We tell you, "Hey, you need to be profitable. I don't care what your revenue is." You tell me you made $6 million last year, that means nothing to us, honestly. If welook at your P&L, you weren't profitable. And how is an owner going to sell their business in 10 years, if they're not profitable today? We need to build up all the different things in order to increase that enterprise value and be ready to sell it down the road.

So when we talk to your owners about building value, what we are suggesting that hey work with other advisors, other CPAs who can help them in that or attorneys, business, coaches, consultants. Because, it takes a village to building value. You need to work with other advisors, other CPAs who are trained in exit planning who can help you in addition to attorneys, business, coaches, consultants. At our firm we bring to you both financial and tax planners and have partnered with attorneys and bankers that are some of the advisors you would need to exit in style. We are more of like the quarterback. Where we say, hey, this is what you need to be doing. Now. You're going to go over here. You're going to talk that person. We're going to get all of these people on our personal advisory board because they're the ones that are going to know how to move you forward.

One thing we have found in exit planning, for all the time we have been doing that, is owners can have a nice lifestyle while they own the business. It's through compensation sometimes through S distributions. But when it comes time then to exit, suddenly that business that might be worth $2 million, let's say, they sell it and they end up with a million and a half dollars. And now if they don't have a lot of outside financial assets, they need to live off of that million and a half dollars for the rest of their lives. And that might be a four or 5% withdrawal rate. So that might be what, $70,000 a year? And they're used to living on two or three or four times that.?

How do you get that across to your clients? That's a really difficult conversation to have. Especially when the owner has been using the business as a lifestyle business. They haven't been paying themselves regularly. We had a client that we acquired and we're going through her P&L and saying, "Hey, look, you need to stop taking whatever's left over at the end of the month to fund your lifestyle. You need to start paying yourself a regular salary." And from that exercise now, we can kind of forecast the growth of the business. We can build in value. And then you're right, we can start saving for retirement. So yes, we want this business sale to be a big chunk of your retirement plan, but we can't rely on that completely. We also have to start saving in tax efficient vehicles. And we have to start putting aside money in other investments.?

Especially for business owners, they really like real estate for example. So how can real estate fit into my portfolio when I retire? How can that supplement my income? Or hey, I really want to go and invest in this other business, in the community or down the road, how can I do that? And still have my business that I'm working on. So it's a lot of different moving parts that business owners are accustomed to, but they have to make sure that they are thinking about this as a holistic portfolio. That all these pieces are working together for the owner's final goals.

Women entrepreneurs, have special challenges especially in a male dominated macho type lifestyle and becomes a special challenge for women who are also business owners?

There are two parts to his issue.?

First, of all we do think that women have different considerations than the typical male business owner. And we do work with both sexes. But when it comes to women, when we talk a lot about, for example, how to pay yourself. When it comes to compensation, women tend to not pay themselves or they pay themselves last. There's also a lot of emotions that happen around money. Money can be a vehicle for carrying guilt or shame or pride or happiness. So, when we deal with women or work with women, we talk a lot about those feelings. So sometimes we feel like a therapist or a counselor. We talk about death and divorce a lot. Statistically women are going to be left alone at the end of their lives. So, we work through that and take into consideration they are taking care of themselves and the people that they love.

We believe that it maybe not quite 50/50, but it's close, it's definitely close open acceptance of women business owners and women just kicking butt really.?

You can't go down any main street and not bump into all sorts of mom and pop shops, independently owned. We do have our big box stores, but for the most part, our community is made up of business owners and entrepreneurs. And when the pandemic hit, we noticed a lot of these baby boomers are suddenly wanting to retire. They want to get out. And if they don't have something lined up, they're selling just whatever they can get for their printer or for the land or for their excavation machine. And to us, that's not okay. Because what that means is that they're not maximizing the value out of the business, out of decades of blood, sweat, and tears, and they're not getting what they deserve from their business. We think a lot of business owners, even in the lower 48, they've experienced a lot of that. And we want to make sure that owners have the opportunity to maximize the value from their business to sell it and to retire on their own terms.

Well, and that gets back to our point mentioned above that the focus is really on education because owners don't know how much money that is that they need to retire in style they are used to. Most owners want to continue their lifestyle after they leave their business. They don't want to really diminish their lifestyle. And they just don't realize that when they sell their business, the net proceeds are not going to come close to being sufficient to let them continue their lifestyle, unless they grow a very successful business. And that's a business that's worth millions of dollars, not little mom and pops. So the mom and pops, which are the vast bulk of businesses in this country, their exit plan is not so much building value in the company because they're not able to do it. It's really financial and tax planning.?

So here we are, the exit and tax/financial planners, whereby we help you build your net worth via right financial and investment vehicles while mitigating taxes that you have inadvertently overpaying taxes that you don’t need to because all CPAs/EAs are not tax planners and record history rather than be proactively working on saving you taxes and studying the 126,000 plus pages and growing of tax codes. Most tax preparers work do is spend lots of time looking back at what you did last year. But they don’t spend much time looking forward. They can tell you all about what you did yesterday. But they don’t tell you what you should do today, or when you should do it or how you should do it.

Tax planning, on the other hand, gives business owners like you two powerful benefits you can’t get anywhere.

First, it’s the key to your financial defense. As a business owner, you have two ways to put cash in your pocket. There’s financial offense, which means making more. And there’s financial defense, which means spending less. For most of you reading this, spending less is easier than making more.?

And for most of you reading this post, taxes are your biggest expense. It makes sense to focus your financial defense where you spend the most. Sure, you can save 15% on car insurance by switching to GEICO. But how much will that really save in the long run?

Second, tax planning guarantees results. You can spend all sorts of time, effort, and money promoting your business – and that still won’t guarantee results. Or you can set up a medical expense reimbursement plan, deduct the cost of your teenage daughter’s braces, and guarantee savings.

But those guaranteed results start with planning. You can’t ever deduct money you spend on a medical expense reimbursement plan if you don’t set it up in the first place. But for a lot of business owners of either sex, that's exactly what they have to do. And in our profession, we have worked with many entrepreneurs from all walks of life. The people that are successful in retirement are the ones that have a good plan and they stick to it. So, we find one common denominator. And what is that? It's the planning – Financial and Tax Planning and Exit Planning.

If you are a woman entrepreneur or a male entrepreneur and need to plan your exit so that you may exit in a lifestyle you are used to call us at (562) 281-1040. Come to us for a plan. You have nothing to lose but taxes, and not build your net worth and possibly thousands to gain. Why would you wait to make that call?