Starting a business is one of the most exciting times in your life. It is the realization of a concept to provide a necessary service to people either within your local area or beyond. However, there are risks and the failure rate is high—approximately 50 percent of new businesses close within the first five years and two-thirds by year ten.
Why do so many new and young businesses fail? A huge reason is bad decisions, from the location in a saturated market to failing to have a sound financial plan.
Read on for more information on financial planning for business owners as well as personal financial planning for business owners.
Understand, There Are Risks in Business and Financial Planning for Business Owners
Owning a business comes with great risk—remember half of new businesses fail within the first five years. A natural disaster could happen, lawsuits, or worse death of a key person. A proper legal structure and financial planning can help you develop a strategy if something goes wrong.
Considerations in Financial Planning for Business Owners
As with any profession, there are known and unknown risks. Financial planning for business owners is not immune to the ups and downs in the market and trends on the street.
A few things to consider:
- Manage the business’s finances
- Determine your financial goals
- Use taxes in your favor
- Save and plan for your retirement
- Diversify your assets
- Take an income
Managing the Business’s Finances
As a new business owner, tracking your finances down to the penny is crucial to getting off the ground. Limit your debt, otherwise, you might not have the funds to grow. There are dozens of books on financial planning for business owners that may provide some insight.
What Are Your Financial Goals?
Having a financial plan as a business owner is smart, but what about you? What do you hope to accomplish as a business owner? Setting personal goals is hard, but financial advisors, friends, and family can help you map out what is possible and how it will happen.
Take Advantage of Tax Benefits for Business Owners
The 2017 tax law makes it possible for a business owner to leverage their contributions for the best benefit as both the operation and individual. Certainly, talk with a professional tax expert or an entity that provides financial planning for business owners.
Protect Your Assets by Diversifying
While you should take a salary, it is normal to limit your income based on your strategy or method. To adjust for those early sacrifices and to protect your retirement, diversify your investments. Financial planning for business owners includes determining how to diversify your assets so you can spend more of your time on the business and less time watching the market.
Take an Income
Taking an income falls in line with planning for your retirement. From a tax perspective, having little income helps your planning. However, you cannot save for retirement if you’re not earning an income or other goals. Financial planning for business owners includes earning a fair income as the owner of your business.
Saving and Planning for Your Retirement
Watching your business’s bottom line may help you stay open, but don’t forget about your future. Your personal financial plan should include saving for your retirement. Set aside money, at least each year, for life after you’ve sold your business or handed the keys to an heir.
Prior to leaving the company you’ve created, part of your financial planning approach should include a succession plan. This may help to avoid leadership issues and other financial complications.
Work With a Financial Advisor
Idea creators are not always savvy at financial planning—and that’s fine. The good news is that resources like a financial planner or advisor helps you avoid unnecessary expenses. There are professionals that specialize in financial planning for business owners.
An advisor also helps with developing an integrated financial plan for business owners to maximize the success of your operation and achieve your personal goals.
Rather than searching for “financial planning for business owners near me,” contact Green Ridge Wealth Planning to learn more about securing your financial future.