The right financial mindset for small business owners

Q&A with Gary McGuirk, Private Wealth Advisor for Merrill Lynch in Boston

What are main concerns for small business owners in today’s economy?

Small business owners have many concerns in today’s economy. They must continue to keep an eye on the bottom line, be concerned about employees and make sure that customers are happy. The events of the last 18 months have made their business journey even more difficult. Now, more than ever, the business owner must acknowledge and address important issues to survive, and hopefully, thrive.

Is now a good time for small business owners to be investing in their company?

Just last week, the National Federation of Independent Business released it highest optimism index rating in the last 8 months. While we are not completely out of the woods, there does seem to be a sense that expectations for a better economy are improving, despite negative economic stories we see each day. More business owners are suggesting an expectation of higher sales, and an expectation of more capital expenditures now than those reported since mid-2008. This trend also comes at a time where the available pool of strong candidates may be at an all time high. Many highly qualified professionals are available and have readjusted their compensation expectations. If business owners see a personnel need to grow or support the future of their business, this may be a great time to start a dialogue and make the investment.

If a business owner’s personal portfolio was hit hard by this economy, how should this impact his or her overall business portfolio?

As a business owner, you would need to consider how your personal assets are structured in relationship to your business. Do you personally guarantee debt? Do you derive income from your portfolio that you need to live? Do your stock investments mirror or relate to the same industry your business is in? Give yourself a safety cushion for the extra income that you and your family require to live.

Don’t neglect your personal financial statement. Many owners have substantial wealth and much of it was invested in the markets over the past year. Very few individuals were immune from significant losses in their personal portfolios. Though you may not find much good news when you open your statements, it is important to face the realities of your financial situation and be realistic about where your investments stand. Take a fresh look at your asset allocations, determine what your real time horizon is for the assets, and invest accordingly.

Are there opportunities for small business to grow in today’s market?

Yes. Small business owners should de-lever their personal balance sheets as much as they can without causing business dislocation. Having liquidity to take advantage of “distressed” sellers will put them in a position of strength. As a business owner, now is the time to stay focused on the long-term goals and resist the temptation to make a dramatic investment decision that could haunt your professional and personal future.