Statistics routinely suggest that a single operating company makes up 80% of most entrepreneurs wealth. And while there is a ton of focus right now on how your 401K and other investments have fared, the real question is actually far broader. How has your entire portfolio fared? Let’s think about it this way: if your investments have dropped 25% in the last quarter, what is the actual impact on your net worth? It’s not 25%, given that only a relatively small portion of your total estate is represented by that investment portfolio. So what to do? How is this downturn going to impact your long term / retirement plans?
Step 1: Re-Run the Financial Plan
I’m confident that you have a financial planner and have in the past done some modelling around retirement. (If you haven’t- Step 0 is to get one!). It’s time to get back together with your financial planner or wealth manager and start re-running the numbers. Most planners will be able to run a series of scenarios for you that helps to model what your portfolio will look like at X years in the future.
Step 2: Value the Company
In the past you may have used some “Kentucky Windage” to estimate the value of your company. A lot of folks put off a formal valuation until just before a sale of their company (and of course by then it’s too late). But right now the most critical thing to do is to dig in on a valuation and understand what impact the current environment has on your total portfolio. This isn’t the time for guess work – it’s imperative that you get an accurate picture of what you are dealing with. You might find that you are still on solid footing for your retirement plans. You might also find that those plans have blown up and it’s time for a reset.
We can help with a “valuation light.” Ask us about using a slimmed down valuation for planning purposes so you don’t break the bank. Contact Us
Step 3: Take Action
That valuation should tell you a lot of things. First, how much is my retirement plan truly impacted? Am I still in a position to sell at the point in time that I had planned to? Is my retirement plan totally blown up? And what do I need to do now?
The silver lining of big, world-moving events is that they create lasting change- often for the better. And no I’m not just talking about washing our hands more. I’m talking about the systemic and structural changes that happen in companies and in economies that leave us better than before. As you work through your planning and valuation process, let’s start to identify what those things are and make them the cornerstone of the plan going forward. Did we learn that our company can run efficiently via telework? Aces – let’s cut down occupancy costs and increase telework as we recover. Have we learned that we have supply chain risk and an over reliance on single sources of supply? Fine – let’s fix that.
The bottom line: take action. Most of us have an opportunity to influence the outcome. Let’s start doing that right now.