Financial Stability

A Timex Watch and Your Business – How much do they have in common?

By John Chionchio – Financial Advisor, Northwestern Mutual

Before there were electronic calculators, PCs and mobile phones many things were purely mechanical, like watches. It’s true. Google it! I remember Jim McKay doing the Timex watch commercials where they put those watches through some tortuous tests, like strapping it to a boat motor propeller. Their big buzz phrase was “It takes a licking and keeps on ticking!” But what does this have to do with your business?

It is surprising, alarming actually, how financially fragile many successful privately-held businesses are. Once your business has the financial wherewithal, your business plan should include a “Timex Goal”. It must be able to take a financial licking and keep on ticking.

Key Person and Buy/Sell planning is certainly a fundamental part of financial stability planning. But how will you handle risks that can’t be insured away? The brutal reality is this - there are some things you must self-insure for. Self-insure is essentially a fancy word for accumulating and maintaining an appropriate amount of liquid financial reserves – savings – hopefully in some far smarter way than a bunch of cash laying around going backwards by the rate of inflation.

The financial stability of a private business can be challenged many ways, like an extended down market or a recession like 2008-2009 when most markets were down. It could be the sudden loss of your star salesperson for unforeseeable reasons other than premature death or incapacitation. Maybe a large client pulls their business or a vital vendor becomes unreliable. Whatever the reason, maintaining your company, your income and your lifestyle when (not if) uncontrollable events come along is a worthy cause.

Even if you’re not overly concerned about the survival of your business, at some point in your growth path to success you deserve the peace of mind of knowing your income and lifestyle aren’t going to pogo-stick up and down with every business challenge life throws at you. On a long flight, it’s nice to remove your seat belt and move about the cabin. Financial stability planning can help smooth out the ride.

Successfully operating your business is one thing, an important one. Successfully “owning” your business is another. It’s the old cliché about working “in” vs. working “on” your business. If you’re not already really good at working in your business you wouldn’t be reading this. But if you’re like most business owners, you never took the course called “Strategic Financial Planning for the Would-be Entrepreneur” so working on your business isn’t quite so intuitive.

Insurance, investments, borrowing, tax efficiency, legal structures – all tools in the strategic planner’s tool box. Financial stability planning isn’t a cookie-cutter thing. It’s different for every business. Timex is still in business. They’ve been in business since 1854. My guess is they’ve financially modeled their business after their watches – to take a licking and keep on ticking!

 

To Plan, or Not to Plan – That is the question!

By John Chionchio – Financial Advisor, Northwestern Mutual

“To be or not to be, that is the question.” Although I am an engineer and financial professional, and not well-versed in Shakespeare, even this one resonates with me. There is a basic philosophical decision that should be made at some point in the evolution of a successful business as to include strategic financial planning in your business plan, or not. To plan or not to plan, that is the question.

Why plan? Why did you choose to start your own business? The answer is the same. Maybe you have visions of financial independence. Perhaps it’s more about time than money and you want more control of your time. Or is it to work at something you are passionate about? All of the above?

Planning is about knowing, not assuming or guessing, that you are getting the most out of your business toward your goals in life. It’s about achieving financial independence and the option to choose how you spend your time at the earliest possible date and with the greatest surety.

What if there was a “Success Machine”? You program your goals into it, along with all of the parameters of your business, and it would tell you the date in the future at which you will achieve your goals and the probability of that success actually occurring. If the machine returned a date too far into the future or a probability that was too low, or both, would you want to work on improving them? To plan, or not to plan? Same answer.

An experienced team of business “ownership” advisors can help you analyze and make intentional decisions about the issues that affect the value you’ve built in your business, the consistency of your growth, the financial resilience of your business, the transferability of it and the continuation of it.

Would you invest in a publicly traded company that you knew was doing no strategic planning to protect the company, to make it financially stable, to increase share value or to ensure the long-term viability of the company? How much have you invested in your company? Are you doing this type of planning?

In my opinion, there is one complete no-brainer that should be included in every entrepreneur’s business plan after start-up. That no-brainer is to understand this strategic planning, get the cost/benefit analysis and make intentional decisions about it. In 1601 when Shakespeare wrote Hamlet and his “To be, or not to be” soliloquy, he was basically recommending that you plan your life, including your death – by design, not default. Whether Shakespeare knew it or not, he wasn’t just a great playwright, he was a great business advisor too!


Northwestern Mutual is the marketing name for The Northwestern Mutual Life Insurance Company, Milwaukee, WI (NM) (life and disability insurance, annuities, and life insurance with long-term care benefits) and its subsidiaries. John Hunter Chionchio is an Insurance Agent of NM and a Registered Representative of Northwestern Mutual Investment Services, LLC (NMIS) (securities), a subsidiary of NM, broker-dealer, registered investment adviser and member FINRA and SIPC.

John Chionchio

Financial Representative

 

To learn more about Northwestern Mutual Investment Services, LLC and its financial representatives, visit: FINRA BrokerCheck