One might rightfully ask, “Why
talk about stock market declines in the concern of Business Succession
planning?” I do it for several reasons.
First, it is important for
all business owners to realize what would happen if you were forced to sell
your business at a loss! The important
lesson is that a balanced financial plan of investments, insurance, and
reinvesting into your business bode well for the financial health of your
business.
In addition, capital
markets can often be fragile or weak.
Consumer sentiment and spending can pull back in times like these and as
a result hurt the future growth and strength of one’s business. So it’s important to invest, insure and plow
back profits in your enterprise.
One important principal of
Business Succession is to have a contingency plan or for the sake of a better
word an Emergency Fund in times like these.
There is an old phrase called, “Cash Is King.” I advise clients to have
anywhere between three to six months in such an account. Needless to say, the monies in said account
would not be invested in equities or even fixed income securities. Rather I would allocate them into a Money
Market account or a business checking account.
Overall I am optimistic
about the future of businesses in general and the economy as a whole. In a recent post I said I have seen this
happen as far back as October of 1987.
To refresh your memory, on Black Friday the market lost a whopping 25%
of its value IN ONE DAY! So be concerned
but don’t let your emotions override reason.
Stay the course.