Building a profitable business is hard work and a major accomplishment. But as entrepreneurs focus on daily operations, planning and adapting their enterprise to market conditions, proactively managing wealth oftentimes takes a backseat to their work.
Ultimately, long-term financial success isn’t just about how much money an entrepreneur makes; it’s about how much they keep and protect. By asking the right financial questions, business owners can help safeguard their hard-earned wealth, mitigate risk and build a lasting legacy.
How Does My Tax Strategy Need to Adapt?
Tax planning is an ongoing process as tax laws frequently change. Failure to keep up can lead to costly mistakes. Entrepreneurs must proactively review and pair their tax situation with effective tax strategies to minimize taxes, maximize deductions and ensure compliance with ever-changing regulations. This is critical for major financial decisions like capital investments, business expansion or charitable gifting.
Whether purchasing a new fleet of vehicles or strategically buying and selling real estate, significant financial transactions warrant a thorough discussion with a trusted team of legal, financial and accounting advisors. This ensures tax implications are assessed before year-end, helping to prevent unexpected tax surprises come April.
What Evolving Risks Could Impact My Business?
Failing to manage risk can jeopardize an entire business, leaving it vulnerable to external threats. Entrepreneurs should work with their advisors — financial, legal and insurance — to get a holistic understanding of what could materially threaten their business today and in the future.
From artificial intelligence fraud to natural disasters that can displace operations, owners must identify and evaluate evolving risks. The unexpected departure of a business partner or a key executive can also disrupt a business.
Proactively managing these exposures allows an owner to implement contingency plans and explore ways to ensure their business is adequately protected. Risk management also allows for greater confidence — empowering an owner to focus on day-to-day operations while preserving their business’s resilience, even in the face of unforeseen setbacks.
Does My Business Exit Strategy Balance Economics, Risk & Control?
A well-structured exit strategy is essential for business owners considering a sale or transition — not only for the business itself, but for the owner’s private wealth as well. Whether selling to an outside investor, transferring ownership to a partner or the company’s employees or merging with another company, every transaction revolves around economics, risk and control.
A strong business valuation starts with a healthy business and reliable business records. Owners should optimize balance sheets and maintain organized financial records. Proactively implementing risk management measures that contemplate industry volatility and legal liabilities can boost buyer confidence and help maximize the sale price.
Deal structures also have lasting implications. Some transactions require an immediate exit, while others involve a phased buyout or earnout period. Owners should align their exit strategy with their future goals, whether ultimately retiring or eventually launching a new venture.
How Should My Estate Plan Change to Align with New Goals & Life Circumstances?
A well-structured succession and estate plan helps create a smooth ownership transfer and helps protect the company’s future. Though related, succession and estate planning serve distinct yet complementary roles in securing long-term stability.
Succession planning focuses on transitioning ownership and leadership to maintain stability and business viability. It involves identifying successors and outlining contingency plans to promote business continuity, and it aims to prevent leadership voids, ownership disputes and financial uncertainty.
Estate planning addresses the legal and financial transfer of ownership in the event of an owner’s death or incapacitation, helping to ensure assets are distributed according to the owner’s wishes.
A well-defined succession strategy provides clarity and operational stability, whereas a solid estate plan establishes the legal framework for a seamless transition. Together, these strategies help safeguard the business and owner’s legacy.
What Can I Learn from Other Successful Business Owners?
Running a business requires staying ahead of evolving industry, operational and financial dynamics. Engaging with a team of experts — whether for regular quarterly check-ins or to assess a new financial milestone — can help them identify gaps and quickly adjust to changing circumstances.
Successful owners prioritize taking great care of their clients, growing revenue, generating positive cash flow and managing risk to maintain viability and financial stability. Drawing inspiration and ideas from other business owners can reveal new opportunities for success not previously contemplated — for example, pursuing a more effective business structure to provide potential added liability protection and tax benefits.
Routine check-ins with advisors help ensure entrepreneurs can make timely adjustments with confidence.
Michael Blanton is the managing director for BMO Wealth Management Arizona. His team specializes in working with business owners and high-net-worth families, helping them navigate everything from business exit strategies to investment management strategies.
“BMO Wealth Management” is a brand name that refers to BMO Bank N.A. and certain of its affiliates that provide certain investment, investment advisory, trust, banking, and securities products and services. Investment products and services are: NOT A DEPOSIT – NOT INSURED BY THE FDIC OR ANY FEDERAL GOVERNMENT AGENCY – NOT GUARANTEED BY ANY BANK – MAY LOSE VALUE.
Estate planning requires legal assistance which BMO Bank N.A. and its affiliates do not provide. Please consult with your legal advisor. BMO Bank N.A. and its affiliates do not provide legal advice or tax advice to clients. You should review your particular circumstances with your independent legal and tax advisors.
Did You Know: Only 60% of business owners and high-net-worth individuals review their retirement plans regularly. Eighty-one percent of those who review it regularly do so more than once a year and the vast majority will make changes to their plans.
