Planning: 3 questions every business owner should ask

Kristin Nelson
Posted by Kristin Nelson
Wealth Management Strategy

Just as no two fingerprints are identical, the same holds true for the financial situations of any two business owners.

Female Asian business woman crouching on the floor looking at many sheets of paper laid out in front of her.But it’s interesting to look at a few broad similarities that may help provide useful checks and comparisons as each owner evaluates his or her wealth management picture.

For example, trends that emerged from a recent survey of entrepreneurs around the globe may be useful in reviewing asset allocation, preferred investment channels, and more. The 2016 BNP Paribas Global Entrepreneur Report, from Bank of the West’s parent company, revealed interesting patterns among 2,600 high-net-worth and ultra-high-net-worth entrepreneurs across 18 countries.

Here are a few highlights that caught my eye regarding the overall average investments of this select group (for the full breakdown, see the link above):

– 20% of the entrepreneurs’ wealth is linked to the business(es) they own.
– 17% of the portfolio is invested in real estate.
– 13% is invested in stocks (for the U.S. cohort, the average figure is 22%).
– 6% of their holdings are Socially Responsible Investments (SRIs).

Another interesting round of data comes from Bank of the West’s annual Small Business Growth Survey, released in September 2015, which found that 72% of business owners plan to invest in their businesses in the coming year.

That figure, along with the fact that half of the owners surveyed anticipate revenue growth during the next 12 months, underscores an opportunity for all business owners – whether a franchisee or a serial entrepreneur – to assess their current wealth management plans.

As 2016 gets underway amid an atmosphere of rising interest rates and potential volatility in some sectors of the economy, these three questions may help your financial planning:

How protected are you against risk? For example, you may want to review how rising rates might affect credit for your business in the next few years. More broadly, risk considerations can also extend to matters like insurance or changes of leadership in your company.

Have you diversified sufficiently? This may apply to your portfolio balance in terms of investment vehicles or global diversification. It may also lead to considering other ways to diversify, such as socially responsible investments.

Do you have a trusted partner? Another perspective, such as from a professional advisor, may help in many ways, including succession planning or business expansion. A trusted partner may also help you access other professionals (e.g., legal, tax, insurance) who can benefit you in specific ways.

The answers to these questions will be unique – and likely complex – for every business owner. They’re also a worthwhile investment of a different kind.

To learn more about wealth management services at Bank of the West, visit our site.

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