7 Financial Planning Tips for Small Business Owners

The life of a business owner is a long and crowded road. Required activities, such as developing customer relationships, handling employee issues and managing cash flow, are time-consuming tasks, but necessary to keep the operation running smoothly.

Unfortunately, business owners often neglect their personal financial goals. It’s more common for owners to put off planning for their financial future until later in life, when “things settle down” or there is more clarity about what the business can reasonably achieve.

1. Managing Cash and Debt Levels

costThese tasks are of the utmost importance for “young businesses” that are just getting off the ground. External demands on a business owner’s financing situation are endless, so it is critical to monitor expenses and conserve dollars to finance the operation.

2. Paying Yourself

Business owners often pay themselves very little in the way of salary — partially due to the reasons I mentioned above, and also due to the need to minimize personal payroll and income taxes. While these actions can be a big help at tax time, they can be roadblocks to helping business owners accumulate savings for retirement or other goals.

3. Diversifying Your Assets

As you save and invest money for the future, ensure that it is properly diversified and compatible with the amount of risk you are willing to bear. Don’t fall prey to “market timing.” Determine an investment policy and execute it in a disciplined way; then, spend most of your time and effort on managing your business.

4. Managing Risk

Venture capitalBeyond their monetary investments, it’s essential for business owners to establish protection for their families. Life insurance and buy-sell agreements, which deal with the buyout of a deceased partner of the business, can safeguard your survivors in the event of your death. Also, disability insurance may be advisable.

5. Planning for Succession

It’s important to keep the issue of succession planning in mind. Getting the most out of your business or real estate investment later on can help guide your personal wealth management decisions after you’ve left the helm.

6. Arranging Your Estate

networking bizz website experts » 1Regardless of age, business owners should meet with a qualified attorney and estate-planning specialist to ensure that their goals and wishes are properly accounted for, including plans for business assets. Younger business owners don’t always feel that estate planning is necessary; but failing to make a plan could put their business and family at risk. At a minimum, business owners should have an updated will that contains instructions on how their assets should be distributed, which may or may not include business assets.

7. Choosing a Financial Advisor or Financial Planner

networking bizz website experts » 2Most business owners would benefit from the guidance and assistance of an appropriate advisor. However, it’s important to ask the following questions:

– Is he or she an expert in wealth management, as it relates to business owners?

– Does the advisor have a fiduciary responsibility to put their clients first, with no compensatory conflicts of interest?

Financial advisors are not created equal; some aren’t held to a fiduciary standard of care. Registered investment advisors (RIAs) comply with the standards listed above, and are regulated by the Securities and Exchange Commission (SEC) or their state. For more information, consult the Financial Planning Association (FPA)’s website.

With some luck and a lot of hard work, you can overcome challenges within your business and take steps toward future growth. But don’t forget to get on track — and stay on track — to achieving your personal financial goals.