Good financial planning is vital to every business, big or small. If you are starting a small business, you need to make sure the financial side of your operations is running smoothly. Financial planning is not a single, one-time event. Rather, it is an ongoing process. Essentially, you must set continuous goals and strive to meet them while adapting to any changes.
The good news is that expert financial planners can use their years of experience to advise you on how to stay on the right financial track. While they will not make your financial decisions for you, they can offer their guidance on how to navigate certain situations where you might be feeling unsure. Here are some things to consider as you plan for success in your small business.
Keep Business and Personal Finances Separate
If you don’t draw a line between your business and personal finances, you risk losing both of them. If your business fails, then you have no money of your own, and vice versa. Designate separate bank accounts for business spending and personal spending. Manage them both as separate entities, and not just as a collection of your own money.
Make Separate Goals for Your Business and Yourself
Besides making sure to keep your own money separate from that of your business, it is important to keep a little separation between your work and home life. Setting goals for your business that are kept apart from your personal improvements can help you focus on making your business the best it can be without detracting from personal goals.
Seek Out Many Funding Options
While using your own savings, credit cards or other personal funds to grow your business (also known as bootstrapping) does work, it is not without risk. Look into diversifying the sources of your investment capital. You can use outside sources such as venture capital, angel investors, crowdfunding, accelerators, incubators, grants, pitch competitions, business loans and other social connections like family and friends. This strategy can protect your business finances by allowing you a steady flow of capital across many sources.
Think About Your Cash Flow
Make sure you are focusing on generating a healthy flow of cash rather than accumulating assets. Cash flow is what makes your business run-it enables you to buy the things you will sell or use, as well as to pay your employees.
Record and analyze the patterns in your cash flow so that you can work with your business’trends. You can use this analysis to determine how much money you should have set aside for the times you are stuck.
Manage Your Taxes
Business taxes can be much more complicated than your personal obligations. Working with a certified public accountant (CPA) instead of doing your own taxes can save you time and stress, as well as help strategize about reducing taxes where possible. It is a CPA’s job to know all the tax laws relevant to you, so they can help you pay the right amount and make sure everything is filed correctly.
Think About Risks
While you cannot plan for every eventuality, identifying and preparing for the most likely threats to your business is a vital step in financial planning. For example, make sure you are getting the most for your money on healthcare, have plans in place for disasters or the loss of important people and protect against fraud and theft.
Create Succession And Exit Plans
If you ever want to move away from your business and go on to something new, you must have concrete, detailed plans in place. In doing so, make sure you know what your business is worth, as well as the values of similar companies in your relevant industry.
Succession is when you hand the reins of your company over to someone else, like a family member or employee. Exit is when you sell the business or shut it down altogether.
Make Retirement Plans
It is important that you factor retirement savings into your financial planning. According to many experts, you should ideally be saving 15% of your pre-tax income for retirement.
Create An Estate Plan
Estate plans help your loved ones and colleagues carry on the business in the event that you no longer can. An estate planning attorney can help you with this.
Trust the Professionals to Help You Make Smart Decisions
You are the driving force behind your small business, but that does not mean that you need to make all of the decisions on your own without seeking feedback first. The experts at Inflection Advisors would be happy to learn more about your personal situation and guide you on navigating the relationship between your individual and business finances. Reach out to learn more or to schedule an appointment to get started.