Why We Chose to Work with Business Owners
Several years ago, I took a slight detour from being a financial advisor to running and growing financial advisory firms. It started quite unexpectedly when a friend and a founder-owner of a successful advisory practice asked me to help run his firm like a "real business." My success in that role led me to a project with another firm, and then another, and so on.
Having been a financial advisor my entire decades-long career, I was confident of my financial consulting chops. But I didn’t know the first thing about running or growing a business. My inexperience notwithstanding, I decided to approach my new role from the perspective of an imaginary buyer of these firms.
So I asked myself, “What would make these firms attractive to me if I were a potential buyer?”
After much study and some practice, I concluded that a firm that is set up to generate a healthy, sustainable cash flow year in and year out long after its owner has moved on is the one that I would invest in. Business endeavor is inherently risky, but I reasoned that a firm with the ability to generate a sustainable cash flow with or without its owner present would give me the best probability of recouping my investment and being further rewarded for the risk I was willing to take.
While each firm I worked with was unique, profitable, and successful, a pattern began to emerge. Every single firm was far too dependent on its founder-owner who also acted as the firm's client advisor, rainmaker, CEO, CFO, COO, HR manager, marketing director, client event coordinator, bookkeeper, and the person who took out the trash. If the owner were to suddenly disappear—voluntarily or involuntarily—the firm would likely decline rapidly and may even collapse in time because no one was trained or equipped to step up and into the founder-owner's shoes and keep it afloat, much less grow it. In appearance, these firms were profitable and successful, but in reality, the quality of cash flow was lacking. To put it bluntly, these firms weren't worth the prices the owners would ask for. Not even close.
So I focused on implementing a system that would generate a healthy cash flow—one that was sustainable, predictable, and transferable—that is not overly dependent on its founder-owner.
Of course, this entailed implementing a strategic plan instead of operating at the whim of the owner, developing a firm-wide growth strategy rather than depending on the owner’s rainmaking skills, documenting business and operational processes, managing business risks and tightening up legal documents, formalizing financial controls, and on and on. Sounds simple enough, but it was hard work.
To make a long story short, to my surprise, I was quite successful at this newfound role as an accidental executive/consultant. In a particularly challenging and time-sensitive project, the owner of the firm was facing health complications. With revenue rapidly declining and clients leaving by the week, we had to act fast and reverse course. When the dust finally settled, I somehow managed to help increase the value of the firm four-fold (400%), and sell it at a price that would have seemed outrageously optimistic when I started the project just one year prior. The most memorable compliment I received from the owner was, “Where were you five years ago?”
Needless to say, I learned many things from working with these business owners. That being said, two things in particular really stuck out to me.
Having been a financial advisor my entire decades-long career, I was confident of my financial consulting chops. But I didn’t know the first thing about running or growing a business. My inexperience notwithstanding, I decided to approach my new role from the perspective of an imaginary buyer of these firms.
So I asked myself, “What would make these firms attractive to me if I were a potential buyer?”
After much study and some practice, I concluded that a firm that is set up to generate a healthy, sustainable cash flow year in and year out long after its owner has moved on is the one that I would invest in. Business endeavor is inherently risky, but I reasoned that a firm with the ability to generate a sustainable cash flow with or without its owner present would give me the best probability of recouping my investment and being further rewarded for the risk I was willing to take.
While each firm I worked with was unique, profitable, and successful, a pattern began to emerge. Every single firm was far too dependent on its founder-owner who also acted as the firm's client advisor, rainmaker, CEO, CFO, COO, HR manager, marketing director, client event coordinator, bookkeeper, and the person who took out the trash. If the owner were to suddenly disappear—voluntarily or involuntarily—the firm would likely decline rapidly and may even collapse in time because no one was trained or equipped to step up and into the founder-owner's shoes and keep it afloat, much less grow it. In appearance, these firms were profitable and successful, but in reality, the quality of cash flow was lacking. To put it bluntly, these firms weren't worth the prices the owners would ask for. Not even close.
So I focused on implementing a system that would generate a healthy cash flow—one that was sustainable, predictable, and transferable—that is not overly dependent on its founder-owner.
Of course, this entailed implementing a strategic plan instead of operating at the whim of the owner, developing a firm-wide growth strategy rather than depending on the owner’s rainmaking skills, documenting business and operational processes, managing business risks and tightening up legal documents, formalizing financial controls, and on and on. Sounds simple enough, but it was hard work.
To make a long story short, to my surprise, I was quite successful at this newfound role as an accidental executive/consultant. In a particularly challenging and time-sensitive project, the owner of the firm was facing health complications. With revenue rapidly declining and clients leaving by the week, we had to act fast and reverse course. When the dust finally settled, I somehow managed to help increase the value of the firm four-fold (400%), and sell it at a price that would have seemed outrageously optimistic when I started the project just one year prior. The most memorable compliment I received from the owner was, “Where were you five years ago?”
Needless to say, I learned many things from working with these business owners. That being said, two things in particular really stuck out to me.
First, for a business owner, their business is often the most valuable asset they own. So the value of their business, and monetization of such value, is enormously consequential to meeting their lifestyle and legacy goals. The net amount they receive from the sale of their business can directly impact what they can and can't afford in retirement and how much they are able to leave to their children, grandchildren, charities, and so on. Clearly, it's worth their time and energy to exit their business by design rather than by default.
Second, given such consequential nature of business value to a business owner's future financial well-being, they should evaluate the amount they will (or must!) receive from the sale—net of fees, net of taxes, net of outstanding bills and loans, net of everything—to assess its impact on their ability to adequately fund their lifestyle and legacy goals. To make this possible, they must—absolutely must—work with a qualified financial planner who is well-versed in business exit planning in collaboration with their CPA, attorneys, and other advisors to run numbers and come up with a concrete and detailed plan—and implement the plan—to help achieve their retirement and estate planning goals. They cannot afford to leave it to chance.
Second, given such consequential nature of business value to a business owner's future financial well-being, they should evaluate the amount they will (or must!) receive from the sale—net of fees, net of taxes, net of outstanding bills and loans, net of everything—to assess its impact on their ability to adequately fund their lifestyle and legacy goals. To make this possible, they must—absolutely must—work with a qualified financial planner who is well-versed in business exit planning in collaboration with their CPA, attorneys, and other advisors to run numbers and come up with a concrete and detailed plan—and implement the plan—to help achieve their retirement and estate planning goals. They cannot afford to leave it to chance.
Thus, we set out to help business owners thoughtfully plan for their life beyond business ownership.
To this end, our unique blend of deep financial planning know-how and field-tested executive management experience equips us to do just that. Given the inseparable and intertwined relationship between personal and business goals, we can integrate personal financial planning and business exit planning by taking a deep dive into their business to help prepare for an eventual sale or transfer in the context of their overall financial plan.
We invite you to work with us.
Respectfully,
To this end, our unique blend of deep financial planning know-how and field-tested executive management experience equips us to do just that. Given the inseparable and intertwined relationship between personal and business goals, we can integrate personal financial planning and business exit planning by taking a deep dive into their business to help prepare for an eventual sale or transfer in the context of their overall financial plan.
We invite you to work with us.
Respectfully,
Hoon Kang, CPA, CFP®, ChFC, CLU
Partner | Co-founder | Director of Financial Planning
Partner | Co-founder | Director of Financial Planning
