Wealth Management Update

Business Building through Proactive Planning


Owning your own business is generally not for the meek. Business owners must manage several roles, serve many masters, and work incredibly long hours to keep all the administrative balls in the air while also keeping the ultimate master—their customers—satisfied. Legislative changes and a constantly evolving tax landscape further complicate things. With the countless number of issues that business owners need to address, it can be important for business owners to collaborate with a team of trusted advisors who can help keep not only the needs of the business front and center, but the business owner’s personal financial and wealth plan top of mind as well.

This Wealth Management Update examines several issues business owners face and actions to consider:

Employee retention

While you may have built the business, finding, retaining, and leveraging good talent is paramount to keeping it going. Key employees can make or break the success of any business; therefore, what matters to them needs to matter to you.

So what does matter to them? First and foremost is a good benefits plan. What may have been a great plan just a few years ago may no longer look so appealing. With shifting regulation and rising costs, benefits plans require regular review so that your company remains competitive. In addition to all the other factors at play, implementation of the Affordable Care Act will further change things in the coming years. Many employers are shifting away from full-time workers or changing benefit offerings for part-time workers as they find employees may be better off with the new government-sponsored options. The questions are many; the answers depend on the structure and size of your business and your unique situation.

An additional area business owners should assess is their current bonus plan. Are your bonus triggers easily measurable? Are bonus targets aggressive enough to incent the right behavior, but still achievable for your top employees? Even more fundamentally, are bonuses enough? In certain situations business owners who need to cement relationships with key employees may want to consider some additional options, including non-qualified deferred compensation and/or an ownership interest in the company.

Personal balance sheet

While there is no doubt taking care of good employees is key to your business’s success, it is even more imperative to take care of yourself. For an owner, maintaining a strong financial position is just good business and this means building a healthy balance sheet.

Too often business owners think of the business itself as their personal retirement and investment plan, and their personal balance sheets reflect this. While your business may very well fund your retirement, there are no guarantees. Having a separate retirement plan or a discussion with your financial advisors about how to transition your business should be a top consideration. A financial plan can help to make sure you are properly diversified and can adapt to any changes to your business or personal life.   

It’s also important to maintain a strong personal balance sheet. Maintaining liquidity is important for several reasons. It can help you deal with issues specific to your customers and suppliers, as well as larger issues related to your industry or the broader economic marketplace. In both scenarios, business owners with financial flexibility may be better situated to weather the storm. For example, during the economic downturn of late 2007, 2008, and much of 2009, many distressed businesses lacked capital to continue and had to be sold or closed their doors. In some instances, business owners who had sufficient liquidity in their personal balance sheets were able to capitalize on those distressed values and make acquisitions. A strong personal balance sheet can provide diversification and may prove invaluable when it is time to sell your business. Business owners who lack diversification with their personal balance sheets may find themselves in the position of needing maximum value from the sale of their company in order to meet their financial needs. This can limit the audience of potential purchasers and may decrease the chances for a successful transaction.

Business succession

While selling your business may be a long ways off and not a consideration in the near term, the reality is that preparing your business for sale starts now—no matter which “now” currently defines your situation. 

Taking thoughtful action in the near term can help set the stage for incredible benefits when the time does come to transition your business. A key strategy is to look objectively at the value of your business from the eyes of a third party. A business with little infrastructure and little in the way of an executive team may hold a lower value than a similar company with a strong executive team and appropriate infrastructure. Building both takes time, time that may be best invested now. Assess honestly, identify gaps, and work to close them.

Clean financials are another major factor in a sale and can make everything easier. From obtaining credit to selling your business, the more structure you have around the financial statements, the better off you may be. Not all companies need to have audited financials but reviewed financials are often a good idea. In the event you sell, the due diligence process will be that much easier. Finally, keep your customer mix in mind. Businesses that rely heavily on a very small number of customers can be both at risk of those customers leaving to the competition as well as being subject to scrutiny by prospective buyers.

You built it, protect it

Proactive planning on key issues can help continue the success of your business as well as provide contingencies for you personally. Building the proper team to provide guidance on key issues is imperative. Contact your relationship manager to begin the conversation today. 



Wells Fargo Wealth Management provides products and services through Wells Fargo Bank, N.A., and its various subsidiaries and affiliates.

The information and opinions in this report were prepared by Wells Fargo Wealth Management. Information and opinions have been obtained or derived from sources we consider reliable, but we cannot guarantee their accuracy or completeness. Opinions represent Wells Fargo’s opinion as of the date of this report and are for general information purposes only. Wells Fargo does not undertake to advise you of any change in its opinions or the information contained in this report. Wells Fargo & Company affiliates may issue reports or have opinions that are inconsistent with, and reach different conclusions from, this report.

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Investment Products. Not FDIC Insured. No Bank Guarantee. May Lose Value.


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Planning - Business

Business Building through Proactive Planning (PDF)
July 24, 2013

In this Wealth Management Update, Senior Wealth Planning Strategist Jave Ragan examines several issues business owners face and actions to consider in keeping personal financial and wealth plans front and center.


Wells Fargo & Company and its affiliates do not provide legal advice. Please consult your legal advisors to determine how this information may apply to your own situation. Whether any planned tax result is realized by you depends on the specific facts of your own situation at the time your taxes are prepared.

Wells Fargo Wealth Management provides financial products and services through Wells Fargo Bank, N.A. and their various affiliates and subsidiaries. The information and opinions in these reports were prepared by the Investment Management arm of Wells Fargo Private Bank, a part of Wells Fargo Wealth Management and a division of Wells Fargo Bank, N.A.

Investments discussed in these reports may not be insured by the Federal Deposit Insurance Corporation and may be unsuitable for some investors depending on their specific investment objectives and financial position. These reports are not an offer to buy or sell, or a solicitation of an offer to buy or sell the securities or strategies mentioned.

Brokerage services offered by Wells Fargo Advisors, LLC. Wells Fargo Advisors, LLC, Member SIPC is a registered broker-dealer and separate non-bank affiliate of Wells Fargo & Company.


Investment Products: Not FDIC Insured, No Bank Guarantee, May Lose Value.