I want to think my perspective on this subject is unique. In fact, it’s the basis for my current business. I believe that not unlike many business owners, funding my retirement was largely predicated around the success of my former business and how I would transition that business into my golden nest egg. Well, the fact that it was “former business” should give you an indication of how that plan worked out.
My former business partners and I had a very successful office furniture company. In fact, we had three separate companies that were all very profitable from the mid-1990s until 2005. We grew from around $5 million in sales to more than $30 million. We went from 15 employees to almost 70 employees. We went from a 7,000 square foot facility to more than 30,000 square feet. We went from one truck on the road to a fleet of more than ten.
I don’t tell you this to beat my own chest. In fact, it’s just the opposite. The world looked pretty good from where I sat, and there didn’t seem to be a better investment than to reinvest back into our own company. We had a lot of retained earnings, but we also needed the capital to fund our aggressive growth plans.
What we didn’t necessarily forecast was switching major suppliers and the difficulty in transitioning from one to the other. The banking crisis of 2008 was responsible for a currency swing of more than 30 percentage points almost overnight. It also created huge layoffs, and increased trepidation in the employment practises of almost every business. We went from full capacity to marginal capacity within a few short months.
With our significant infrastructure, operating, and salary costs, we went from printing money to spilling red ink almost overnight. My Partners and I burned through millions of dollars of our retained earnings in the hope that a return to prosperity was just around the corner.
In February 2010, we closed the doors of our business. The business that had yielded so much promise, so much opportunity and represented so much of my future. I walked away with nothing, except a battered ego and some battle scars and a Doctorate from the School of Hard Knocks.
When it came to picking myself up, dusting myself off and starting to pick up the pieces again, I was forty-five years old and in an industry that I had learned to resent. It was time to find a new career, but in what industry?
I wish I could say that in March 2010, I had an epiphany to start the business that I have now, but that’s not the way it worked. In fact, it took me years to carve out a niche for myself. A niche that could help me educate business owners not to make the same mistakes that I had made. If I had come to this realization sooner, I probably could have prevented my own demise. The fact was, I didn’t know that I could’ve avoided a lot if I had the direction of a few professionals.
The one thing that I’ve realized since then, there are a lot of business owners who are invested in the same way that I was in my business. In some cases, it’s proven to be a brilliant financial strategy but is there a wiser retirement plan for business owners? My experience would say yes.
As the owner of an incorporated business, you have some unique opportunities. In particular, you have the ability to safeguard yourself and your business from different types of business risk.
- Business Protection:
- Creditor Protected Assets
- Tax-Deferred Opportunities
- Leveraging Secured Assets
- Dividends and Bonuses are not the only solutions.
- Paying as a business expense versus in After-tax dollars
- Capital Alternatives for Business Owners
While I often refer to my first business as a failure, it was just the opposite. I was given a once in a lifetime opportunity, to work and learn from one of the most incredible people I know. I learned so much about myself, managing people and the inner workings of a business from someone that never treated me with anything but the most profound respect (except maybe when I purchased a pig roast at a charitable live auction). I was given this incredible opportunity because of the generosity and vision of Norine Bevan, who saw something in me that I never saw in myself.
It’s true that my net worth was literally worth millions but similar to the stock market, it’s not the value of the portfolio, it’s what it’s worth when you cash out. Our cashing out would’ve meant, converting retained earnings into personal assets. As it’s nice to have a healthy balance sheet, income statement and cash flow, sometimes there’s nothing better than taking money out of your business and paying down debt or contributing to your retirement fund. As we discovered, retained earnings are only great to have if you have the other parts of your house in order.
Chris Coulter is the Founder and President of The Finish Line Group. He works with business owners to leverage their businesses to increase their wealth, reduce corporate and personal taxes, create viable succession strategies, enable employee retention strategies and allow them to exit their businesses on their terms.
Chris’ passion for what he does evolve from the mistakes he made in his first business; by not diversifying his risk and not utilizing a lot of the opportunities within his business to create significant wealth. Chris found out the difficult way and now educates business owners on how to avoid many of his former oversights and ultimately control where their finish line ends.