Success Can Depend Greatly On  the Effectiveness of Your Financial Design:
  • Corporate/Tax Structure -  Are you a Sole Proprietor?  Should your company be an LLC, C-corp, S-corp,
    or some other structure?  Is your family heavily involved in your business?  Do you need to consider a
    Family Limited Partnership?  How do you make the decision?  Are taxes the only consideration?  You
    should be concerned to with taxes, liability, and conversion of business to 'sold' in the future.  'Sold' could
    mean to family, partners, another company, or even closed for good.  Be prepared, planned, and ready for
    any situation.
  • Record Keeping - Once you have your company goals and plans in the works, one of the most important
    areas commonly overlooked by a vast majority of owners is the importance of good record keeping.  Must
    of us understand the risk of not maintaining good records for IRS purposes, but it's easy to overlook the
    need to have quality records for the sale or distribution of the business.  If you want maximum dollar or
    valuation for leverage, then you better have your records in order for at least 3 years.  Many buyers are
    demanding 5 years of positive performance and the records to prove it.  Sloppy records means sloppy
    management and potential liabilities.  Put yourself in the buyer's position and understand how they make a
  • Retained Earnings - When a company makes money it can be a good idea to retain earnings.  It simply
    means you don't pay out all the profits but maintain some in the accounts of the company.  This money can
    be invested in the name of the company or simply held in cash equivalent accounts like CDs, Money-
    Markets, and Savings.  Why would you do this?  There are many reasons including planning and valuation
    of the business.
  • Cash Management - As mentioned above, cash can be deposited to a variety of accounts.  It's important
    to understand how to make money, a rate of return, on cash you deposit to the bank.  Most banks and
    investment firms have cash management accounts designed to attract more business deposits, but they
    don't always tell you how to make use of it.  Get the details and begin to earn more on your deposits.
  • Investment Programs - Often business owners have money parked in accounts which they maintain for
    short-term needs and borrowing.  In many cases the Owner knows that a portion of the money may not be
    withdrawn for an extended period of time.  There are ways to invest the money and maintain the leverage
    for short-term cash and emergency needs.  Understanding how to utilize this process can have a
    meaningful positive effect on the internal rate of return for the business.
  • Banking Preparedness - More record keeping?  When you need to go to the bank for more money your
    interest rate and other terms are designed according to your effectiveness in making money, owning
    valuable assets within the business, and personal credit.  Most owners never prepare to go to the bank.  
    Instead they let need and success drive the process.  If you have ever been turned down for a loan, even
    though you have a good business and credit, it is likely to be because of the calculations the bank uses to
    assess your risk.  If you have good records it's an easy process.  If you have poor records you may not be
    able to get loan.  If you then approach hedge funds and other private investors you may find they are more
    difficult to deal with than the bank. Preparing for Capitalization Needs is one of the most valuable things you
    should manage because you don't want to leave opportunity or money on the table.
  • Conversion of Business Assets to Estate Wealth - Most business owners plan to be successful, but
    few plan to leave the business successfully.  Owners overlook the process of moving value from the
    business to the estate.  It can happen in little bits along the way in the form of pay, transfer of real assets,
    or it can happen suddenly with the sale of business or loss of life.  Being prepared and making the transfer
    possible determines how much of your success will be truly captured or lost forever.
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