Follow Dallas Linkedin
Email Dallas Email
Business Growth
Nov 18, 2015

Either You Have It, Or You Don’t

Sponsored Content provided by Dallas Romanowski - Managing Partner, Cornerstone Business Advisors

Business owners who are planning for successful futures should always begin by identifying and understanding their primary objectives for themselves, their families, their ownership and their businesses. Key objectives include:

  • The date you wish to exit;
  • The amount of cash you want upon exit; and
  • Your choice of successor.
For this coaching tip, let’s look carefully at that second objective: How much cash must your ownership of the business deliver to enjoy a financially secure post-business life? For most owners this is a great starting point for determining when, or if, they can leave their businesses on their own timeline and on their own terms.
 
The Issues
 
Joan D. was the 58-year old owner of Oleander Data Analytics, Inc. She had engaged her financial adviser to:
  • Set a realistic assumption for a rate of return on her investments;
  • Research actuarial information to determine average life expectancies for both she and her spouse; and
  • Help her and her spouse agree on and establish an acceptable post-exit annual income amount.
As part of this process, Joan and her adviser reached the critical question, the answer to which would determine Joan’s ability to retire on her terms: What must the value of Joan’s business be if Joan is to leave, as she desires, at age 63?
 
Like Joan, your resources are likely in the business and outside of it. You need to know the value of both so you can determine if there is a gap between the amount of money you will need in the future and the amount you have today. If you have enough to secure your financial future, your planning will go in one direction. If you don’t have enough for complete financial freedom, your planning will go in another direction. Both scenarios are fine, but you’ll want to know which one fits your situation. Any gap must be quantified, and to exit successfully you must create and implement strategies to close that gap. Most owners retain an experienced financial planner to help with this project.
 
The Process
 
Joan and her adviser used the following process:
  • First: Joan and her spouse agreed on their future annual income needs.
  • Second: Joan and her adviser, using their agreed-upon estimate of a projected rate of return, calculated how much Joan’s non-business investment assets would be worth at Joan’s desired exit date.
  • Third: Joan’s adviser calculated the amount of investment capital needed to pay Joan and her spouse the target income each year for the duration of their lives (based upon current actuarial tables and assumed reasonable, maybe even conservative, investment returns). This amount needed to be net of taxes, since Joan intended to use it for spending.
The Bottom Line
 
When the business falls short of the value needed to achieve your financial targets, you should consider working with a business coach to build business value that achieves your goals. When the business value meets your needs, you turn your attention to other goals and objectives, such as taking care of loyal employees, leaving a legacy in your industry and your community, and answering the “What’s next?” question. You either have it or you don’t. Keep in mind that neither circumstance eliminates the need for planning.
 
Contact our firm for help in organizing the right advisers to determine your business’s current value and the gap (if any) between what you have today and what you’ll need in order to exit on your terms. We can help you to understand your ultimate objectives and what you must have (and must do) to reach them.
 
The Cornerstone team includes former C-Level executives, successful entrepreneurs and advisors who offer unmatched experience in delivering advanced, custom-tailored, results-oriented solutions for business leaders. As a member of the Business Enterprise Institute (BEI), Cornerstone is an authorized distributor of BEI’s content and Exit Planning Tools. We developed the Performance Culture System™ to help clients implement best practices and drive high performance throughout their organization. For more information, visit www.launchgrowexit.com, call 910-681-1420, or email [email protected].
 

Other Posts from Dallas Romanowski

Bizjournalblockad
Ico insights

INSIGHTS

SPONSORS' CONTENT
Chris coudriet

A Public Service Profile for Mental Health

Chris Coudriet - New Hanover County Government
Junegunter teachinghorse headshot 5721115557

What Is Next?

June Gunter - TeachingHorse
Cd

Your Communication Style is Your Strength

Hoop Morgan - The Forté Institute, LLC

Trending News

New Owners Announced For South Front Street Restaurant

Staff Reports - May 23, 2022

Coastal Entrepreneur Of The Year For 2022 Named

Johanna F. Still - May 24, 2022

Former First Bank Exec Named CFO Of New Hanover County

Staff Reports - May 23, 2022

World-famous YouTuber Spotlights Two Local Restaurants

Jenny Callison - May 25, 2022

Governor's Office Honors Brunswick Co. Volunteers

Staff Reports - May 24, 2022

In The Current Issue

Owners Taking Fermental To New Level

Fermental is one of Wilmington’s more unique watering holes – a bit quirky, but home to many loyal patrons who appreciate its laid-back atmo...


Creative Campus Aims To Draw Artists

The Cucalorus Festival has covered a lot of ground over the past 28 years, and with executive director Dan Brawley at the helm, it continues...


Riverlights Preps For More Development

Realtor Kathy Merlo and her husband, Tony, moved to Riverlights two years ago, into a Trusst Builder Group house facing a 38-acre lake....

Book On Business

The 2022 WilmingtonBiz: Book on Business is an annual publication showcasing the Wilmington region as a center of business.

Order Your Copy Today!


Galleries

Videos

Trying to Grow a Business?
2020 Health Care Heroes
2020 WilmingtonBiz 100