By George Erb The Seattle Times.
Like other Americans bitten by the entrepreneurial bug, Keri and Stephen Morgret want a small business large enough to support their growing family for years to come.
But turning their startup into a sustainable business they can live on is no simple task, as the Morgrets know all too well.
They own Morgret Enterprises, which does business as Strike Models. It sells kits, parts and plans for remote-controlled model warships capable of doing battle with small cannons that fire BBs.
The models continue to outshine the company's financial performance, however.
Strike Models breaks even by selling about $40,000 worth of warship kits and related gear online every year. The Morgrets estimate they need to increase the annual revenue five times, to about $200,000, for Strike Models to support the family.
And the family has gotten bigger. In September, Keri Morgret gave birth to daughter Eloise, the couple's first child.
In recent years, the couple used a division of labor to stay on firm financial footing. Stephen, 43, stopped work as a mechanical engineer when they moved from California to Seattle in 2013 and ran the family business. Keri, 39, earned about $82,000 a year, with benefits, as a community manager in a Seattle tech company's marketing department.
But the challenges of having a child, getting their business off the ground and saving for the future prompted the Morgrets to ask for help. The Puget Sound Chapter of the Financial Planning Association paired them with Aimee Huff, a certified financial planner and senior vice president at ICON Consulting in Bellevue, Wash.
"The bones of their situation were very solid," Huff said. The couple has about $100,000 in various retirement accounts and about $21,500 in readily accessible cash reserves. They owe about $248,000 on their home, which is worth about $360,000. Their only remaining debts were about $30,000 in student loans.
Huff's analysis showed that the couple had a net worth of about $261,000.
Of course, the Morgrets were contending with two of the leading sources of family stress: having a child and starting a business. Then, while they were working with Huff, they had another stress-inducing moment.
Keri lost her job last month. She is job hunting while also weighing whether to work for herself. The couple's cash reserves came in handy. "It helped that we had a little bit of a buffer in the bank," Stephen said.
The biggest red flag for Huff was the Strike Models business, which was not providing much financial support for the family.
If the couple are unable to kick the company into a higher gear, Huff said, "they may face a decision down the road" whether to turn the business into a hobby and look for other sources of income.
ICON often taps outside advisers for its clients. At no cost to the Morgrets, Huff connected the couple with an accountant.
She also brought in small-business adviser Mark Brothers, a business intermediary Murphy Business & Financial Corp.
Among other things, Brothers urged the Morgrets to re-examine the company's prices and come up with a budget for how much money they need to live off the business. He also urged them to sell their kits through a local retail outlet instead of only online.
Meanwhile, Stephen is working on lowering the cost of making model parts while increasing production rates. He said he is prepared to also look for work in the manufacturing sector.
Neither of the Morgrets has a will, so Huff advised them to prepare them now that they are parents. She connected them with an attorney who can advise them on estate planning as well as business law.
Having a financial plan and a team of advisers has been reassuring in a challenging time, the Morgrets say.
"We're more confident about where we are," said Keri, who has a master's degree in learning, design and technology from Stanford University. "It sucks that I'm unemployed, but it feels good to have a road map."
Huff called Strike Models "the biggest variable for the family."
"It will be a time-will-tell situation for that business," she said. "We're setting them up as best we can." –––– Tips for small-business owners
Small-business owners tend to be so focused on running their companies that they often don't carve out enough time to properly manage their personal finances.
Those kinds of entrepreneurs "would be the rule, rather than the exception," said Aimee Huff, a certified financial planner and senior vice president at ICON Consulting.
Small-business owners can also have a hard time seeing the financial connections between their companies and their households.
Huff urges small-business owners to:
––Think about how the structure of their companies affects taxes and personal liability.
––Take full advantage, when it makes sense, of tax-deferred savings plans, such as individual retirement accounts and health savings accounts.
–Get outside advice on coming up with succession plans and exit strategies that don't jeopardize their companies and their own financial goals.