Are you where you want to be financially (we doubt it…)?
How do you measure your financial security?
If you’re like most entrepreneurs, you’ll answer that question by pulling out your P&L statement. You’ll talk about projected growth and, if you’re particularly savvy, future market opportunities or the estimated salable value of your company.
But that doesn’t answer the question I’m really asking.
How do you measure YOUR financial security?
Given our firm’s extreme focus on helping your business make money (by increasing revenue, profit, and salable value), it might come as a surprise to hear that our “why” isn’t about business goals at all.
Our purpose is to help entrepreneurs live their ideal lives. Much of that comes from running a successful business, especially if (like most) your ideal life requires a good amount of cash.
But ultimately, your personal financial health is not synonymous with the success of your company.
In the end, you are not your business.
I’ve seen too many business owners tie up all of their funds in their company rather than thinking about their own future needs. Let’s face it, we’re an optimistic bunch. We’re always one market pivot or major exit away from hitting it big. But what happens if the exit has to be pushed back a year or the market pivot hits a snag?
Take a moment and honestly ask yourself: Outside of your business, what controls do you have in place for ensuring your and your family’s financial security? Can you retire from your business and still maintain your standard of living? When?
If you’re maxing out your 401(k) each year, you’ve got a start—but it’s probably not enough. You need a clearer picture of where you are right now and where you need to be (usually for the next 30+ years).
The difference between the two is what our partner Derek Mohamed calls the “wealth gap.” It’s the space between your rosy picture of the future and what the numbers say about your projected financial assets.
Identifying that gap can be a harsh wake up call. But not acknowledging it is like running your business without understanding your numbers: all guesswork and gut instinct. Both can leave you and your family financially exposed.
How do you know if you have a wealth gap? If you can’t confidently state, “I need xxxx dollars to maintain my standard of living; I have a clear plan to get there; and I’m on track to execute that plan,” then there’s a lack of visibility. And there’s probably a delta (i.e., wealth gap) between what you need and what you have.
If this modality looks suspiciously like setting and achieving goals inside your company, you’re very perceptive! You need the same clarity and accountability for your personal finances that you have (or hope to have) for your business.
If you suspect you have a wealth gap, what should you do about it?
I’m not going to tell you how to set up your personal finances in 6 easy steps. You need to get yourself a trusted financial advisor who will show you where you’re at and help you proactively manage your financial future. Contact us if you’d like an intro to Derek and his team, or get a recommendation from a trusted friend or colleague.
I don’t suggest going it alone (although I know some of you will anyway, you rebels!). That’s like trying to manage your company’s finance function by yourself—the details will bog you down, and it’s too important to risk getting it wrong.
And finally, don’t blame yourself for all the time you could have spent planning and saving (I’m right there with you - I wish I had done a better job at what I am now passionately advising you to do). That’s in the past, and there’s nothing you can do to turn back the clock. If the best time to plant a tree was 30 years ago, the second-best time is today. The same goes for your personal finances. Now is the next best time to begin.
