More than a philosophy, it’s a discipline
You don’t know what you don’t know.
That sentiment is echoed by the three partners at MillCreek Financial Consultants whenever they discuss the blind spots people often have when it comes to finances.
William Green, the company’s president, has an innovative philosophical approach shared by the firm’s other partners, Austin England and Robbie Kinney. They work with clients on a macroscopic level to help them realize the best way to navigate uncertainty in the highly dynamic U.S. and world economies.
“A lot of the people in our business sell solutions, like features and benefits,” said Green, who has 22 years of experience in finance. MillCreek instead focuses on problem-solving and works to be a macro manager for their clients, bringing third parties, such as CPAs, attorneys, property managers and other external experts into the planning process.
“Our job as we see it,” said Kinney, “is to be a financial coach, a financial educator.” Providing a real-world perspective on financial education is a challenge MillCreek takes very seriously.
The wealth equation tells us that Wealth = Money x Rate x Time, but this formula is deceptive. If money and time are fixed, the rate is the most important part of this equation.
That, Green asserts, is a wrong way to plan and creates risk.
“Saving is way more important than the rate of return,” he said. “The reality is we can’t predict taxes. We can’t predict interest rates. I mean, could anyone really predict that we were going to get basically 0% on savings for 15 years?”
Yet most traditional financial planners use this methodology, putting “just enough money in the gas tank,” to get their clients to the destination. MC takes a different approach to succession planning, teaching their clients how to protect, save and invest in what they see as the right way.
“People often have a business balance sheet and a personal balance sheet,” Green said. “And that’s wrong. In reality, the business balance sheet sits on top of the personal balance sheet. The business is an asset of the owner. They own that stock. The goal is to ultimately transfer that business to the personal balance.” This could be as a legacy, in retirement or due to a change in lifestyle. Most business owners plan for their employees’ futures without considering their own, until it is too late.
A key component to any plan is identifying what each client wants.
“You can’t understand a solution until you fully understand the problem. It’s not always about money,” Green explained. “Sometimes it’s about family. It’s about fairness. Sometimes it’s about getting the highest multiple we can with the least amount of cost possible.”
Planning in a way that protects assets should be the first step toward expanding a company’s value. “Money that just sits there loses value,” Green said. “Math is not money.”
Many people think of assets as fixed like a problem in a mathematics textbook. But reality is different. If six oranges are eaten at a rate of 1 per week, how long will it take before all of the fruit is gone? Arithmetically, the answer to this is fairly simple: six weeks. In reality, there is more green than orange by day 10. At week three, no one is eating that fruit. After six weeks, someone is cleaning up a greasy mess. “And that’s what will happen to money if it’s not tended to,” Green said.
Though they offer all financial market capabilities, MillCreek consultants thrive in the space between fully conceptualizing problems and discovering the scope of real-world solutions. They partner with their clients to develop realistic goals for assets, while they still hold value.
Clients often devalue their businesses by failing to create a succession plan. In some cases, if they die without a plan, the company’s worth plummets or is nullified completely.
“For most people, the company’s most valuable asset is the owner’s ability to work,” England said. When that goes away, the entire business may suffer.
In addition to experience and expertise, many trades require licensure or certifications that are nontransferable. For example, an electrician might will their business to children who lack the credentials and skills to wire a building and cannot honor existing contracts without external assistance from experts. Those contracts could now be worthless to the person holding them.
“Naturally,” Green added, “business owners are focused on running their businesses,” and cannot always see the hidden costs that arise as a result of doing business. “You really have to have a protection-first philosophy. What we want is maximum protection at minimum cost.”
Planning can ensure that a business is protected. With a succession plan, entrepreneurs can benefit by selling their businesses to a competitor or apprentice, whereas a family member inheriting a company might struggle to sell or be forced to sell at a fraction of the true value.
“If we are driving down a road and we see a detour sign that says ‘bridge out in 10 MILES,’ do we really need to go down the road 10 miles just to see if the bridge is out?” Green said. “Or do we start detouring then? And I think that’s what we bring to the table. To move beyond protection is to create a model, a road map, and we can measure and verify what’s really going on from a macroeconomic world.”
With inflation the highest it has been since 1981, retirement seems out of reach for many people, but in reality, saving and investing in the right areas are more important than ever. It starts with planning contingencies and building protections into long-term goals.
“At the end of the day, clients need to have a coordinated and integrated exit strategy,” Green explained. “The cost of transferring business is phenomenal. There are good ways to transfer business. There are bad ways to transfer business. From a transitional standpoint, we spend a lot of time helping clients validate and verify what is the cost of transition. How do we make it valuable? How do we make it cost less?”
Business owners need to be able to make their assets and liquidity work for them.
“There are only three ways to leave a business,” England said. “Get hauled out, limp out or walk out. You gotta plan for all of those.”
Completing the math analogy from before, rather than allowing the oranges to decay and become someone else’s mess, MillCreek works to ensure that each client’s legacy will grow, so entrepreneurs and their families may enjoy the fruits of a lifetime of labor in the long term.
William Green is at work on a book – working title “Should Have Asked Me First” – projected to be available by August 2023. The book covers his philosophical approach to financial planning.