As a business owner, I know that most of the time, getting things done is better than getting things done perfectly. When you are acting as your own head of business development, head of marketing, head of strategy, head of operations, head of product, head of logistics, and office manager, things tend to get a little hectic!
That’s why having a third-party perspective can be so valuable. When we’ve created all the roles and processes for our business ourselves, sometimes we need an outside viewpoint in order to add efficiency or value to our structures.
Think about it like a portfolio for traditional investments. You would always want to identify a benchmark against which to measure those investments, so that you know what’s working and what’s not.
Here are the areas of your business I recommend evaluating to make sure you are optimized and operating as efficiently as possible.
Have You Thought About Your Business Structure?
Is your business a sole proprietorship? An LLC? An S-Corp? All of these have different implications for your taxes and liabilities.
Many people begin out operating as a sole proprietorship because it’s simple. However, a sole proprietorship does not create any separation between your business assets and your personal assets. The important part here is for your liabilities. If your business were to ever be sued and found liable, you’d potentially have to use your personal assets to pay damages. This leaves you and your family open to major personal losses.
Maybe you have a partnership. A partnership is an unincorporated business owned by multiple parties. In partnerships, business profits are divided among owning partners and reported on tax returns. While there can be many forms of partnerships, they generally offer flexibility in terms of management and profit sharing, but like sole-proprietorships, partners are personally liable for the partnership’s debts and legal actions, which is a risk.
If you have an LLC (Limited Liability Company), then your business structure combines the tax benefits of a partnership or sole proprietorship with the liability protection of a corporation. An LLC is set up as a distinct legal entity from its owners, who are referred to as “members.” Members of an LLC have limited liability, which means that their personal assets are generally not at risk if the LLC is sued or has other debts.
There are two main types of corporations: S corporations and C corporations. Corporations are legal entities that are separate and distinct from their owners.
An S corporation does not pay taxes on its profits, but rather the profits and losses are passed through to the shareholders and reported on individual tax returns.
C corporations are traditional corporations that are taxed as a separate entity from its owners. This means that corporate profits are taxed twice. The company pays taxes on its profits and shareholders also pay taxes on received dividends. However, major advantages to having a C Corp include the ability to sell stocks and bonds to raise capital, having the ability to offer stock options as part of a compensation package, which can help attract talent, and if an owner/shareholder leaves or becomes incapacitated, business operations continue relatively undisturbed, which creates stability.
I always recommend assessing your business’ current structure to ensure that you are able to maximize your legal protections and tax advantages.
Are You Saving For Retirement?
There are too many benefits to creating a retirement plan to ignore them, even if you plan to sell your business to partially fund your retirement.
First off, creating a retirement plan adds to the diversification of your portfolio. It adds stability and means you aren’t relying on the sale of your business to fund 100% of your retirement.
Retirement plans can also help you save on taxes, as some of the costs are tax-deductible. If you have employees, retirement plans are one of the best ways to attract and retain top talent.
There are types of retirement plans that can work for you depending on whether your business has employees. Check out my article, “Retirement Strategies for Small Business Owners” to read more about different types of plans.
How Will Your Business Handle An Interruption?
If something happens to you or your business partners, what systems, processes or procedures do you have in place to make sure your business can continue to function or can recover from an interruption as quickly as possible?
This is referred to as business continuity. You want to make sure that your business can go forward and that you have your estate plan in place to protect your family in the event of your death or incapacitation.
Depending on your business, you may need a buy-sell agreement in place, or some other means of ensuring a smooth sale or transition.
How Does All Of This Relate To Value?
When we work together, I will work to understand the current set up and processes of your business before we go through an exercise to learn what you need to get out of your business upon exiting. Then, we will work together to make sure that the value of your business is heading in your desired direction.
Taking a step back to get an outside perspective can help you determine where you can add value and help you see new opportunities that you may not have thought of on your own.
Typically, we’ll work together to improve cash flow, increase profitability, lower your risk, and make sure your books are in great shape. This can add a lot of value as you make sure your processes are optimized for your ongoing business growth.
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