From the Atlanta Business Chronicle – October 5, 2009
Businesses changing financial plans
For nearly 20 years, Patrick Ungashick has provided financial and advisory services to business owners — eventually founding White Horse Advisors LLC in 2004.
With 150-plus fee-based clients, White Horse now has more than $1 billion in assets under advisement. Ungashick recently shared with Atlanta Business Chronicle the impact of financial reform on local businesses.
Q. How can business owners evaluate what type of retirement plan is best for their companies?
A. Owners need to determine the primary reason for having a retirement plan. Most larger employers offer a plan primarily as a benefit to employees. However, many owners of medium to small businesses use retirement plans as a means to reduce income taxes, and benefiting employees is secondary. Getting clarity around this issue up front makes determining the best type of plan simpler, because different retirement plans are better suited to meet those two different objectives.
Q. What are some of the major challenges businesses face in terms of financial planning in a difficult economy?
A. Cash, cash and more cash. Cash means survival, or put differently, lack of cash can mean potential collapse. Businesses and their owners have to take aggressive actions to conserve cash. Cash also means the ability to take advantage of opportunities that arise in a difficult economy. Most everything right now is “on sale” — labor, real estate, businesses, etc. Cash is king more than ever in these difficult economic times.
Q. How have businesses changed financial planning strategies in response to the financial market meltdown?
A. Most business owners we work with have become far more conservative than they would like to be in response to the financial conditions. For example, revenue forecasts and budgets are cut way back. Many owners have lowered their paychecks and suspended or cut many of their compensation programs to conserve cash. This is a huge challenge for business owners, because many of them have 50 percent to 90 percent of their net worth tied up in the business and its supporting assets, which means most of the eggs are in one basket. It’s very difficult to diversify away from the business when the owner needs to keep cash in the business.
Q. In your opinion, what investment opportunities are out there for businesses looking to capitalize on today’s market environment?
A. There are many opportunities. It’s an outstanding market to consider buying or increasing leased commercial real estate to set up for future business growth. (Financing is tight but not impossible.) Multiples are also low for business sales — meaning a business owner looking to expand via acquisition can potentially make some great moves right now.
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