Balancing Today & Tomorrow: The Critical Role of Wealth Planning for Business Owners (Sponsored Content)

In Springfield Business Journal’s 2023 Economic Growth Survey, a significant finding emerged: Net incomes were higher in 2022 with expectations to grow or remain stable in the next year. Nearly 40% of respondents were business owners, the largest segment of participants.

This paints a promising picture for owners – and stresses the importance of wealth planning in this opportune time, according to Skylar Smith, a certified financial planner and shareholder at KPM CPAs & Advisors.

“Business owners are really good at investing back in the business, trusting it and knowing it,” Smith says, but adds it often comes at the expense of overlooking their personal succession planning and long-term financial goals.

This oversight can be costly, not just in financial terms but in overall well-being. A 2023 Planning & Progress Study conducted by The Harris Poll on behalf of Northwestern Mutual, adds weight to the matter, revealing that financial uncertainty can have severe personal repercussions. People frequently report feeling depressed (37%), losing sleep (36%), experiencing strain in intimate and family relationships (26%) and suffering physical illness (23%) due to financial worries at least once a month.

These figures underscore the intricate link between financial stability and mental, physical and social health, particularly for business owners whose personal wealth is often deeply intertwined with their business finances. The connection between business ownership and wealth planning is complex, Smith says.

“It’s very common for the majority of the wealth to be in the business,” he says before noting the importance of a strategic approach to managing both aspects in tandem. “It’s a common cliche, but there has to be a balance of living for today but saving for tomorrow.”

Smith notes that whether for business or personal financial planning, engaging with a financial planner offers advantages. This is particularly relevant for business owners contemplating their exit within the next six to 10 years – a strategy that 17% of respondents in the SBJ Economic Growth Survey are considering.

“The timeline for good planning is sooner rather than later,” Smith says.

The process begins with a discovery phase, he notes, where individuals and business owners articulate their goals, while advisers assess strengths, vulnerabilities and opportunities. KPM’s comprehensive approach involves ongoing monitoring and collaboration to adapt to changing goals and market conditions.

“Financial planning is a moving target, more of an art than a science,” Smith says.

The 2023 Planning & Progress study further shows that working with a planner not only bolsters financial improvement but also enhances confidence in retirement and overall financial security. Respondents who collaborated with financial advisers for retirement rated their confidence 29 percentage points higher than those without such guidance.

Smith credits this sense of increased certainty to a regimen instilled by financial planning, bolstered by the support of a trusted adviser.

“There will be market cycles that challenge you,” he notes, emphasizing the need for discipline to maintain the course set by sound financial strategies.

Wealth planning is highly personalized, and not a one-size-fits-all proposition, Smith adds: “It takes a team that understands the nuances.”

From entity structure and tax elections to investment strategies and risk management, each decision is a step toward long-term financial health. Business owners often have a significant portion of their wealth tied up in their businesses, Smith says, making it crucial to find a balance between reinvesting in the business and building personal wealth.

An end goal for 29% of business owner respondents in SBJ’s Economic Growth Survey is a liquidity event, such as a sale or acquisition. Smith notes that proactive planning for these transactions is where the value of a team of professionals truly shines. By highlighting opportunities and optimizing for them, rather than focusing on pessimistic trip cords, Smith says advisers can help business owners navigate through the complexities.

“Wealth planning is so comprehensive,” Smith says. “It takes a team, given how nuanced it can be, to ensure the right hand knows what the left hand is doing.”

This article is brought to you by KPM CPAs & Advisors.