This is the second in a series of posts I’ve created about entrepreneurs. The people in these interviews are not only local business owners but have the truest entrepreneurial spirits I’ve seen. Whether they work for themselves or for someone else, each offers at least one strong habit, thought or suggestion to help develop a successful business. Their passion is seen in their work and how they operate in the world.
As a new online business owner, I often wonder if I am utilizing my finances in the best way possible for my business. Long-term planning can be hard when there are so many moving parts in creating a new business. Recently I sat down with Lou Miller, a financial advisor from Thrivent to find how financial planning can help business owners.
Lou has several certifications in the financial services industry including: series 63, 7, 65 certifications for financial planning, as well as, a life and health license.
He offers all variations of investment options, portfolio set-up, management and the buying and selling of stocks and bonds. He also offers recommendations for new business owners, as well as, growth strategies for medium and large size companies.
Utilizing a Financial Planner
Lou works with business owners who have a revenue generating business that are specifically looking to build their wealth thru company growth. This type of business owner has a team of experts they delegate to in different fields and are posed for successful long-term growth.
He described his ideal clients this way: “Business owners who are motivated and teachable make great clients. They have values, goals and have a call to action. Like many entrepreneurs, they are willing to invest in themselves and value the process of growth and a planner’s expertise to help get them where they need to go”.
Tip: It’s easier and smarter for a company to set financial goals after they have consistent money coming in.
The Importance of Planning
“If you don’t plan, you plan to fail”
When deciding if you need a financial planner, he suggests you first start by asking the following questions:
- How important is your time?
- Can you let someone else be the financial expert?
- Are you able to build a team and have a financial expert on your team to delegate to?
- Do you check the stock market every morning? Are you willing to manage a portfolio and spend hours learning how to first, create a portfolio, then invest and manage it?
- Do you know which portfolio is the best for you?
- Do you know how to get the best tax savings?
“Start with the end in mind”
Before meeting with a financial planner:
- Look at your Business goals and objectives first.
- What do you want to do with your business? Where do you want it to go?
- Decide how big you want your business to be
- Decide how you set up your business structure (LLC etc.) will be based on the size and other factors.
- Create Company Values –
Company values should be in sync with your company’s financial plans too. They will not only tie directly into financial goals but also financial decisions (for example: where and how to spend money, what to spend money on).
- Create a framework. Having a framework allows for goal setting and tracking milestones.
To use the example of fundraising, Lou suggests working backwards and looking at the desired end result first. Then set goals to achieve that goal after it’s decided how much in donations you need to shoot for. Important questions to ask would be: How many donations (in actual dollar amounts) will be needed to achieve that financial goal? How many fundraising events would be needed? How many contributors at each event would be needed to get to those amounts?
Mindset is Important
Minds shift strategy
As a financial expert, Lou looks for entrepreneurs that are seeking out financial opportunities that can make their money work for them. Money is not just a thing to buy, sell and trade, but a tool to help with the overall running of the business.
- Helping a business owner look for ways to buy him/herself out: The IRS can treat bonus’ different than regular income when it comes to taxing, so setting up a pay-out system that benefits the company and individuals is important. (Please consult with an IRS or tax specialist for specifics on this).
Protecting Your Business Assets
2 Ways protect your business profits
#1. Utilize Key employee positions and your position as a business owner by creating bonus systems:
Occasional bonuses (for tax purposes) fall into a different tax category (W-2 vs. 1099). That means they are taxed differently. A business owner can also bonus employees outside the of the 401, and this allows owners to benefit themselves in ways that regulators over 401K’s do not allow for 401K profit sharing.
Tip: offer Christmas bonuses.
#2. Utilizing the right types of Insurance policies.
What happens when that employee who has put in 20 years and is a key financial contributor leaves abruptly or, worse yet, dies suddenly? Many companies struggle with financial loss while figuring out how to fill that key position, taking a big financial hit in the process. Did you know that owners can take out policies for themselves or key employee so if that gap hits, the company doesn’t lose income?
One alternative solution is to have the company “bonus out” the employee when they retire so the employee’s retirement becomes a business event without needing a death benefit policy for each key employee.
3 ways Key Employee Insurance can be used:
1. Key employee insurance plans do not just have to be for company protection. They can be offered to employees to cash out when they leave. The company turns the policy over to the employee, so they can cash that policy out as part of their retirement savings.
2. In event an employee does pass away unexpectedly, the company can still cash out the policy to help cover upcoming business losses while they find a replacement.
3. Employees and business owners that have been with the company for 20-30 years can be bought out. The good news for owners? They can buy each other out at any time.
Execution is Action
The ideal client he often sees are business owners, entrepreneurs, solopreneurs, owners of small, med or large size businesses, in their 40-50’s. They are owners that are invested and in it for the long haul. They are looking to invest and grow their financial portfolio and are often looking for a resource, an educator to help them manage this aspect of their business growth.
What doesn’t work? Procrastinators.
Procrastinators don’t work well with planners because they are often too resistant and not motivated to change what they are doing. The example he offered was of a client that was very resistant about any recommendations or suggestions offered. At one point, Lou found a way to save him $80 per month in insurance coverage. That might not sound like a lot but over time it adds up, and in this client’s portfolio, that translated to a $80 per month raise in his retirement income – guaranteed for life.
Lou equates having a financial planner to using a GPS on a road trip. As the business owner you are the driver. You set the destination yourself. Then you and the planner work towards those goals. A financial planner is the GPS to help guide you there; rerouting when needed, creating a new plan, or maybe just having an ongoing conversation.
The client in this type of relationship defines how the relationship is will work. Some clients require regular meetings, monthly check-ins and reviews, updates and support. Others prefer quarterly or annual reviews and like to have the planner “on the back burner” so to speak.
To learn more about the services Thrivent offers for businesses, click here: Thrivent.com/products/
For more information or for a free consultation, you can reach Lou at:
This post was approved by: Louis T. Miller III
5 Centerpointe Drive Suite 100, Lake Oswego, OR 97035
Disclaimer: I am a certified Business Coach and not an expert in the financial industry. Please consult with a certified Financial Expert regarding the information found in this post.