In 10 digestible chapters, readers can get a holistic picture of Eagle’s approach and how we have helped business owners overcome various obstacles in their value growth journey. Give us a call if you’d like to receive a copy for yourself or your colleagues, clients, or other business owners.
Meanwhile, we are continuing our look into each of the six personal indicators for readiness. Last month we examined balance, and how cultivating balance at all stages of business development pays off. This month we delve into capital, which is more than just dollars in the bank — capital comprises your personal financial security as well as your understanding and preparedness regarding finances, insurance and estate planning.
I have seen owners build strong, profitable businesses and still feel paralyzed at the thought of transitioning because they lack certainty about their personal finances. This is a capital readiness problem, and working through it requires thoughtful preparation.
What do you mean by capital, and how does it affect personal readiness?
The dictionary defines capital as net worth, the excess of assets over liabilities. We all want to maximize our capital — it’s the reason businesses exist, after all. In our personal readiness framework, capital means your net worth as well as how comfortable you are with the financial security systems you’ve put in place. These must be weighed with, and without, your business.
Assessing your capital is not as simple as adding up the commas and zeros. It means understanding what you’ll need to maintain your lifestyle and safeguard your family if an unexpected event occurs.
Confirming you have the appropriate amount of capital means no longer feeling trapped, as if living paycheck to paycheck. This first requires doing the work to account for:
- taxes
- debt
- medical costs
- charitable giving
- insurance
- providing for your legacy
- estate planning
Financial uncertainty almost always turns into emotional hesitation. Owners who do not yet have capital readiness might delay decisions for years or rush into a transition too soon. The thought of freedom can bring about a sense of panic if an owner does not have a solid grasp of their net worth and whether it will be enough to enjoy that freedom.
Once you finally get that clarity, you also gain confidence.
Understanding your personal financial position and accounting for present and future needs will allow you to make better decisions. You can evaluate opportunities thoroughly and act with intention, rather than feeling forced into predetermined outcomes.
Like all the other personal readiness indicators, achieving capital readiness will take time. Understanding the factors that affect your capital is a starting point. In alignment with other advisors and professionals, we can help clients do the work necessary to find out what level of capital they need and achieve it.
Putting the necessary financial structures in place — in terms of insurance coverage, estate planning, and wealth management — will grant you peace of mind and a clearer head to make decisions on how, and when, to transition.
Some owners haven’t taken the time to thoroughly examine their personal finances because all their energy and focus goes toward their business. This is a catch-22, as failing to deal with your personal capital results in poorer business decisions and less freedom to act on opportunities.
We can help owners start the process of achieving capital readiness, at any point in their business journey. Call us today to set up a meeting.