Frequently Asked Questions

You likely have a lot of questions. Below are some of the ones we receive most frequently. If you don’t see your question on the list, contact us — we’re happy to chat with you.

Q. I put every dollar I own into my business to make it successful. Is this risky?

Yes, it’s very risky. If times get tough and your business is your main income source, you could lose everything. As a business owner, you need to build up some wealth outside your business, especially for retirement planning. Although in start-up, most business owners will reinvest all their cash back into their own enterprise, it’s never too late to look at ways to diversify investments outside your business. You may choose to use outside investment vehicles, or consider options such as purchasing property (perhaps your building), or setting up a qualified retirement fund.

Q. How can I bridge the gap between my family, my business, and my advisors?

One of the biggest mistakes privately held businesses make is lack of coordination between family members and advisors. Effective advisors need to be able to probe, challenge and offer recommendations in an atmosphere that is supportive, not adversarial. Otherwise, difficult topics such as succession and estate planning end up being dealt with behind closed doors or avoided altogether. Look for processes and tools designed to build open communication between family members and advisors in order to deal with these delicate and emotional issues.

Q. What’s the most serious mistake a privately held company can make when looking at succession planning?

The most serious mistake is doing nothing at all. When you decide not to implement a succession plan, you’re allowing someone else to make the decisions for you. This typically results in a more expensive and unfavorable outcome.

Most business owners understand the importance of proper succession planning but fail to implement anything, which is one of the reasons more than half of businesses don’t survive the founder’s death. It’s critical that you enlist advisors with expertise in privately held companies so you can develop strategies to properly transition your business from one generation to the next.

Q. What’s the difference between a cash flow statement and an income statement? Why do I need both?

Most business owners think of profitability and cash flow as interchangeable; they aren’t. In fact, most businesses fail for lack of positive cash flow, rather than for lack of profit. You can remain in business for several months or more without profitability, but you can’t remain in business very long without positive cash flow. Monthly cash flow statements that are easily accessed and understood are critical to any business, regardless of size. If you’re missing these reports, you need to find out as soon as possible how to get them.

Q. I get several financial reports each month. Most of them I don’t have time to review. Why bother?

More isn’t necessarily better. If you don’t have time to review all the reports you receive, or you don’t really understand what the reports are telling you, then you don’t have the information in the right format. The first step is to determine what’s most important to look at each month. Many critical business items can be illustrated on a single spreadsheet that gives you a confident look at your business.