Count your assets Featured

8:00pm EDT July 26, 2007

Wealth management is important to every business owner because, the fact is, most of us plan on funding our retirement from the sale of our greatest asset. Because this is so often the case, we must plan how much wealth we need to maintain a comfortable lifestyle and determine whether our businesses are capable of “earning” this wealth so we can retire at a targeted date.

“Wealth management isn’t a process that takes a few weeks or even just a couple of years — it should be an ongoing strategic plan that involves your key advisers early on,” says Craig Johnson, president and CEO of Franklin Bank, Southfield, Mich.

The last few months, we covered how to set retirement goals, value and then sell your business with Mero Capo, president of APB Financial Group Ltd., the wealth management arm of Franklin Bank. Now comes the last step in your exit strategy: wealth management.

Smart Business asked Capo to provide insight on how to make the most of your assets and time during the ongoing process of wealth planning.

Even though wealth management is the last process of an exit strategy, when should owners begin planning?

Often, business owners think about wealth management as, ‘What do I do with this money now that I have it?’ While this is the case, you should be considering this question before you sell the business or even think of selling. How much wealth do you need? If you don’t have this wealth now, how will you achieve it before you exit your business? An investment adviser will help you address these issues while you can still do something about them. By waiting to manage wealth until after you’ve already ‘cashed out,’ so to speak, you may find out that you didn’t realize necessary gains — and this introduces a whole different management issue. Enlist in a professional, early on, who can help you determine objectives and evaluate your current situation. Once you know what your goals are, you reach them by developing your business and making sure you can boost sales, revenue or expand your customer base.

What should an owner consider when determining wealth management objectives?

Assets and time are the key variables in wealth management. First, you must figure out what lump sum of money you need to retire. You must know how much wealth you will require to sustain your lifestyle after you exit the business. The next question you should answer is, when will you exit the business? Some owners retire at 60, others plan to work until they can no longer do so. Establish these two goals as early as possible — time and needed assets. The same rules apply if you are an executive participating in a 401(k) or similar program.

Once you set these asset and time goals, what’s next?

This is when having an investment adviser is especially helpful. He or she will evaluate your current situation because you must understand where you stand now before you can figure out if your assets are at the level you expect for your retirement target date. You’ll tally the current worth of your business, your assets, outside investments and their returns. What will those investments look like on your retirement date goal? Will the assets of your business increase by that point? What assets can you rely on that are not generated by the sale of your business? Depending on your situation, you’ll identify that there is a shortfall or an overage in what you have versus what you need to retire. The next question becomes, how can you boost your assets, personal and business, to reach your goal? Now you are starting to create a pathway to meet your goals.

How should owners invest outside the business?

It’s difficult for owners to take money out of their net pay to put in investments, and many of us don’t fully explore all of the options available in the qualified retirement world. We view profit-sharing plans, 401(k)s and other benefit programs as something good we are doing for our employees. It’s a good idea to accumulate assets in a tax-deferred plan, so if you don’t get the value out of your business that you anticipated, you’ll still have a secondary nest egg to fall back on. And these days, there are many creative plans out there that are combination profit-sharing/defined benefit plans. Talk to an adviser about the options. You don’t want to count on the sale of your business alone to fund your retirement.

MERO CAPO is president of APB Financial Group Ltd., the wealth planning and advisory arm of Franklin Bank. Reach him at Reach Craig Johnson, president and CEO of Franklin Bank, at or (248)386-9860.