BY MARCUS IWIG, CFP®, CPA, MAcc Lead Advisor
I grew up playing the game of Yahtzee at my grandparents’ house. While it’s mostly a game of chance, there is a bit of strategy. Yahtzee is a dice game in which you get 13 turns to roll five dice and try to achieve certain outcomes. You can’t control what you roll, but you can often use what you roll in multiple ways. You also have to choose on which part of the score sheet you are going to use your roll. How you fill in your score sheet with what you roll, especially early in the game, can give you more margin and flexibility later in the game as you work to achieve more challenging outcomes with the dice. For reference, the best roll in the game, called a Yahtzee, is when you roll the same number with all five dice.
So why all this talk about Yahtzee? I certainly would argue that building a business is more than just a dice game, but both involve risk. How you fill out your score sheet in Yahtzee is a good example of what business owners might decide to do with their business profits.
As a business owner, your Yahtzee score sheet is your personal balance sheet. Every year, you choose where to put your profits. Some years are better than others, but what you do with the excess when things are good can make a big difference. You might reinvest in the business. You might put some into retirement. You might use some to pay down debt. You might spend some on needs or wants, increasing personal property. Each of these is like choosing the line to fill out on the Yahtzee score card.
Here’s the bottom line: Where you put those earnings along the way ultimately will help determine how high your final score will be and help ensure you aren’t dependent on your final roll, the transition of the business, for success. You’ve built this business to provide for you and your family. You might pass it to your children, sell it to employees or sell it to a third party, just to name a few. The transition of your business is the last roll in the game. Wouldn’t it be nice if there were multiple possible outcomes that would work well?
While the transition of your company isn’t exactly a game of chance, there are things that might be out of your control or that might not go as planned: The economy might change; kids could decide they don’t want to own the business; a key employee could leave; your health might change … you name it. By taking a strategic approach to building your balance sheet along the way, you can create greater flexibility in your options and timing for the transition of your company and help ensure a successful outcome before the final “roll.”
While I have seen a Yahtzee on the final roll of the game to seal the victory, it doesn’t happen often. If you are running a successful business, there’s no need to leave that last roll to chance. A financial advisor with expertise in business transition planning can help you strategically allocate cash flow and build a balance sheet to help give you more flexibility and potentially more wealth in dollars and lifestyle.
| Marcus Iwig, CFP, CPA, MAcc