Business Owner's Mid-Year Financial Gut Check

Mid-year is a critical time for business owners to capitalize on successes gained in the first half of the year, and course-correct when things aren't going as planned. In this episode, get a checklist of what to look for and do from WHZ Managing Partner, Advisory Leisl L. Langevin, CFP® CDFA®.

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Transcript

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Welcome to you and your Money. Today's episode features Leisl Langevin, managing Partner advisory at WHZ Strategic Wealth Advisors. Today's topic is the business owner's mid-year gut check. I think a lot of business owners listening probably know exactly what that means. Yeah, that's right. And mid-year is often that time when you sit back and you reflect over the last several months and you start to say, okay, what did I set out to do in the beginning of the year? And then you start to ask yourself, where am I at this point in the year? And are margins holding up? How does my profit and loss statement look? Am I making the profit that I thought I might be? Or, you know, am I hiring? Is that still something that I need to do? And of course, we have rising costs with energy and other things. So is that impacting profitability? And so just those are the really important things. But I would— one of the things that maybe business owners don't always ask themselves is, am I personally secure outside of my business. So, we'll touch a bit on that throughout our segment today. Interesting, because I think a lot of business owners tend to think of the business and their personal finances as one thing. Yeah, that's exactly right. And I mean, it makes sense. Most business owners, they pour so much of themselves into what they've built. And, but if you're focused so much on growing the business and maybe not, again, diversification, that word is coming up again, but diversifying yourself a bit outside outside of your business, that can create some real risk. And that's, again, business owners, they struggle a bit with how much money to keep inside or outside of the business and then how much should be going towards that personal wealth building. So there's no real universal, you know, it's a balancing act really. So we try to balance that with what the growth might be in the business versus what that might look like for them personally. So let's talk about that balancing act. Why is this such a critical issue right now specifically? Well, with given the economic environment, it's definitely a bit more complicated for businesses. Certainly they're dealing with inflationary pressures and labor challenges too. I mean, I mentioned the unemployment rate is low, but the actual participation rate continues to decline, meaning less people in the workforce in general. And, and then you've got changing tax consideration And of course we had the tax law passed last year. So that has impact, an impact overall, personally as well. And then it's the higher financing costs too, interest rates. So one of the delicate things that we have to balance this year is if inflation continues to creep up, we may see a creep up in interest rates. So that's going to impact the business owners. And then of course, tariffs and supply chains and things like that. Been mostly figured out, but still some uncertainty from time to time there. So, and, you know, I mean, you have a very competitive business altogether, so, or competitive business market altogether. I mean, there's, you see a lot of mergers and acquisitions and things and companies coming together, but it's making sure that you are keeping some of your profits to invest back in, but also separating that out so that you can, when you look at yourself on paper personally, you have enough liquidity or cash on hand personally to make those personal decisions too. So it can be a balancing act, but we help business owners through this all the time. So somebody can technically own a successful business and still not actually feel financially secure? Yeah, and we see that, and it's really because the business could be generating a lot of revenue, but What that doesn't mean, I mean, they could have a lot of costs too with the business. So, what they actually are taking home or what they're actually saving is not all that much, or they're really focused on growing their business and that they neglect that portion of their retirement planning. And I mean, we see this quite a bit. It's just making sure that they have enough in the business because you have to have enough to maintain expenses, to do payroll. And but if you're neglecting your own wellbeing and, and savings, you have to focus on that too. So there's a lot of reviewing of profit and loss statements and balance sheets to make sure that we, those are adequately funded. That's probably a scary realization. Yeah. Oh, certainly. And, and business owners, I mean, they might also overestimate what their business is worth. And that's something that we, especially for business owners that are aging or getting closer to that retirement date, it's making sure that they have had a chance to actually get what the business value is, whether that's from an accountant or some other business that is valuing their company. And, you know, there's so many changes. And as we evolve as an economy, it's tough to say, okay, 10 years ago this is what my business was worth. Today it might be worth less, or it might be significantly worth significantly more. So you have to stay on top of that as well. And, and again, in, in these cases, if you're pouring all of your profit back into your business, it might be your biggest asset. And so you want to make sure that you're— you are getting the right value for that when it's when it's time. Liza, you talked about business owners pouring profit back into their business. How do they do that? Yeah, well, so we talked about pouring profit back in and from, you know, all of their revenue, but also to separate it and to put some of that money into their own personal bucket. So when we talk with business owners, we think about them building wealth in two buckets. One is their business and building that strategically. And then number 2 is extracting and taking some of that wealth out of the business to build your own personal financial security beyond the business. So again, that diversification, it creates resilience in times of downturns. And so it is longer-term healthier for both business owners and them personally. Does that feel counterintuitive for entrepreneurs because their instinct is usually to reinvest everything? Yes, it does. And exactly, I mean, they're naturally optimistic. And so what makes them so successful is that they are doing and they're trying to grow as much as possible. They're seeing opportunity. And so what we have talked about with business owners is establishing what you might call like a personal wealth floor. And what that is, is basically just saying, okay, this minimum amount of money that consistently will go towards personal savings. And I'll give you an example. I had some real estate investors that were pretty heavily in the real estate business, and they had 90 to 95% of their wealth tied up in, in real estate assets. And so we set up a recurring contribution into their investment account, and and from 9 different business accounts. So it was something that, you know, when we looked at the numbers, we said you should have this money available to invest, but they never felt like they did because they were always reinvesting back into their real estate business. So anyway, it gave them— we've started to work towards building that personal wealth outside of that, that business. So it's, it's been hugely helpful. And we've done that with plenty of business owners with retirement accounts and other types of accounts outside of their business. So you're essentially forcing balance into the system. Yeah, that's right. And again, I mean, the business, it can consume every dollar it feels like. And but really it's that, strategic reinvestment back into the business that'll increase your profitability and the enterprise value of your firm tremendously. And so, I mean, some important things to consider as you're, you're building out and, and building and growing your business is to make sure that you have operational efficiency. You're investing in technology. Obviously, that's not going away, especially with AI. You're building systems in place as you get bigger so you can have repeatable processes across the team, and then also that you're developing that next-gen leadership as well. And those are things that can strengthen a company long-term and something that we focus on, especially at WHC. Liza, I'm intrigued by the fact that here we are talking about business owners and the like, and obviously money and investments are involved. But in many of our shows we do on a monthly basis with folks from WHC Strategic Wealth Advisors, we're talking about the market, we're talking about investment and portfolios, things like that. I think this goes to show the depth of what you do at WHC, that people might not think about the fact that you work with business owners to help them make more money and be more successful. Mm-hmm. Yes, exactly. We've actually partnered with Rock Labs Advisory, which is a business owner that has been— he's done a lot of business transitions and valuing companies and things, has had a really successful career and is now doing consulting. But he's— we've partnered with him to help him build the businesses for our clients and help them to realize how they could get greater value out of their business. So, I mean, there's partnerships like that that help health on that side as well. So it's a full comprehensive review of every, of all parts of business ownership and building that personal wealth. So it's really neat to see. What are some of the signs that a business owner might need a mid-year reset? Yeah, well, there's a few of them. And first, it's if you haven't reviewed your numbers carefully over the last several months. So Typically we recommend doing a monthly financial check-in. So how is profit and loss? What's the balance sheet look like? And you know, sometimes it might be a little bit repetitive. It's like, OK, we're on budget with, with these numbers. Profit looks good, but it's oftentimes we're finding that the business owner is so focused on working in the business that they don't work on the business. So it's like taking a step back and saying, what are the numbers look like and are we on track? And then second, if you don't know— or if you don't have a sense for how dependent you are, your personal lifestyle is on your business performance, it might take a second to realize, okay, what am I charging against the business that I would need personally? So that's a really important number to know as well. And then also third, having a clear succession and exit strategy. And that's something I mentioned, that business owner that has that advisory consulting practice, he can help to to set that succession or exit strategy. And so that is something that is, we'll talk about here in a second, but very important. And then just making sure for the stress levels are, if they're consistently high, you might feel a bit stuck and despite that outward business success. So just making sure that you take a step back and reassess. Well, speaking of succession planning, let's talk about that for a minute,'cause I know many owners avoid that conversation. They do, and it's hard. I mean, you're— you've built up this great business. Are you going to give it to family? Are you going to give it to the employees? I mean, what feels right? And it can feel very overwhelming, but having— sitting down to think about who might take over the business, or maybe you're selling it to, to again somebody who's outside, or a private equity firm or something. But there's so many different options, and the question is whether that transition happens intentionally, so on your own terms, or reactively because there's some health or some other issue that's gone on. So the earlier the planning begins, obviously the more flexibility a business owner may have. But you just want to be sure you're structuring it the right way and that there— you, you get what you, you want. And that, you know, you make sure that you do that the earlier the better. And even if you're not planning to sell or do a success or have any succession plan in the real near term, it's still a good conversation to have. Does personal financial planning tie directly to that conversation as well? It does. Yeah, exactly. So, I mean, if you're doing business planning and personal financial planning, they can't— they have to exist together. And that's because they need to know, again, what is the lifestyle I'm trying to support? So, as a business owner, you have your probably charging a lot of expenses against the business, like cell phone, car, those types of things. And and then if you're no longer in the business, it's like, okay, well, what income and lifestyle do I need to try to support? So you need to know how much you're actually spending so you can put it against a financial plan and say, do I need to save more, increase my business value, try to get more out of the sale if I'm doing a succession? And then it's figuring out what's the retirement income stream after that business sale. And so you just wanna make sure that you have a realistic view of what your retirement will look like. Again, knowing the value of your company, how much you have in personal assets outside, and how that'll support your income in retirement. So, very essential. Liza Langevin from WHC Strategic Wealth Advisors talking about a business owner's mid-year gut check. One thing I notice when talking with business owners is that many of them carry an enormous amount of pressure silently. Yeah, no, that's true. I mean, the higher up you go, or as a business owner, you might feel a little bit lonely because you have employees relying on you, family, customers, and clients relying on you. And especially during, you know, back during the pandemic, I mean, a lot of business owners felt a lot of stress. And, you know, because there was so much uncertainty across the globe. So that's why to having a close, trusted advisory team matters so much because we can help you manage. Okay, so you've got the business risk, we know what you're generating in revenue, and by the way, we're building your personal wealth outside of the business as well. And we can help to coordinate things like tax strategy, of course, retirement planning, risk management, making sure you're taking on the right amount of risk and business planning as well. So these are all things that we can help build together and maybe take some of that stress away. Do emotions lead to poor decisions also? It can. And so, I mean, this is true in any personal or business, but for business owners, it mostly comes down to if they're feeling they have a lot of high emotions, they could make a decision to stop growing their business, or they're feeling the pressure of making up for uncertainty and trying to grow the business too quickly and doubling down. So anyway, having that disciplined, thoughtful, measured decision-making is really what's going to drive longer-term success and mitigate that short-term volatility or excitement or fear that you might be feeling. Liesl, for somebody listening now who owns a business and realizes they probably do need this kind of mid-year checkup, where should they begin? Well, I mean, they could start by reaching out to us, of course, and but it really comes down to getting yourself in order, making sure you're reviewing financial statements whether that, you know, that's a P&L, that's your balance sheet, what's your debt, do you have any debt on the business, and then also in addition to business, reviewing your personal balance sheet as well and what's outside of your business, and then of course the knowing what your tax exposure might be through— you've paid them through halfway through the year, but then we've got the rest of the year, and are you on track? And so again, it's just building the two, and we can help with that, whether it's working on your business or working on your personal finances. So those are not exactly the same, and there's different strategies that go behind each of them, but one that should be looked at together. That's such an important distinction. Yeah, it is. And again, just building a successful business is an incredible accomplishment and you've put so much blood, sweat, and tears into it. And so ultimately we want that to support your life, your family values, and your future. And that's something that we again focus on and really enjoy doing. It can be really fun because each business is so different. So that thoughtful planning can really help for longer-term success, which is really cool to see. Liesl, I'm looking at some letters after your name here, CFP and CDFA. What do those mean and how do they help you do a better job as a managing partner at WHC? Well, yeah, so a CFP is a Certified Financial Planner. We require all of our advisors to have that. We actually have one advisor going through the program now. And, but it's one of the most highly regarded designations in our industry. So, That's very rigorous coursework and helps us to think strategically and plan and help make your financial plan be better. And then the CDFA, not as exciting but also relevant in our world, is a Certified Divorce Financial Analyst. So, helping those going through separation in terms of divvying up assets and what might be the most tax efficient and all that. Taking those considerations, it's much like financial planning, but it's slightly different because you're dividing assets up and making sure that, that they can live comfortably. So anyway, and Liza, also one of 3 folks from WHZ Strategic Wealth Advisors who have been all named to the 2026 Forbes Shook Best in State Wealth Advisors for Connecticut. Liza, among just 58 women advisors recognized with the top women distinction statewide, and remains the only advisor from Windham and Tallinn counties to receive it. She's one of 3 WHZ advisors named to the Best in State list, and the others are our longtime friend Jim Zahanski and also Lawrence Hale. But obviously a nice honor for you, Liza, and maybe give a thought or two about that award, that recognition, and what that means to you. Yeah, I mean, it's a really— we're all very honored. Of course, it's a team effort, and, and while Jim, Lawrence, and I were recognized, our team is behind all a lot of, you know, the work that— or all the work that we do. And so it's It's a really great, great honor and recognition. And, you know, it's again, they are checking to make sure you've got a good, you know, clear background check that you're at. They look at your assets under management, how you're working with clients. So very cool award and we're really excited about Sam For more information regarding wealth management and customized financial planning with WHZ Strategic Wealth Advisors, please visit whz wealth.com whz strategic wealth Advisors offer securities and advisory services through Commonwealth Financial Network Member FINRA sipc, a registered investment advisor Fixed insurance products and services offered through CES Insurance Agency. They practice at 697 Pomfret Street Pomfret Center Center, Sa. CT 06259 and 392AMerrow Road, Toland, CT 06084. They can be reached at 860-928-2341. WHZ Strategic Wealth Advisors do not provide legal or tax advice. The tenured financial services team strives to support clients in achieving their financial life goals while providing absolute confidence and unwavering partnership for life.