Financial planning for business owners is an important resource that allows them to focus on running their operations with confidence.
Although it can be helpful for people in any position, financial planning for business owners is particularly useful. If you own your own business, you've undoubtedly put a lot of hard work and dedication into it. However, managing the operation takes more than just effort!
Planning your personal finances is important, but making a financial strategy for your business is even more crucial. A well-crafted plan will address the needs of your business at every stage, while also allowing you to work toward achieving your own personal goals. Trying to do this alone is never a good idea — you already have more than enough on your plate.
Q: If I Haven’t Started My Business Yet, What’s My First Step?
A: The first step is the most important one, as it ensures you know what you're doing as you get started. Formulating a business plan is essential to success, as it will act as a roadmap you can follow as you turn your ideas into reality.
Your business plan should include a summary of your company's goals, your target market and an understanding of what you will provide your customers. You can also outline your sales strategies, identify the funding you need (and how you'll get it), as well as what will make you stand out from the competition.
Additionally, your plan will also need to identify the structure of your business regarding effective management. Having a strong financial plan will be a solid foundation to build on, and that's where a helping hand will be useful.
Q: Does Owning a Business Increase My Risks?
A: Many people decide to protect themselves in the case of unexpected issues. These issues could include loss of assets, early death, illness and liabilities for losses, and owning a business intensifies the risks you'll face. You'll need coverage if operations get disrupted, whether due to an unforeseen disaster or the loss of a person critical to your success. Lawsuits are another potential risk to your finances, and worker's compensation is also a consideration if you have employees.
Specialized insurance will be necessary, as the coverage will need to extend beyond what you have in place for yourself and your family. The more prepared you are, the less you will need to worry about unforeseen incidents impacting the success — or even the survival — of your business.
Q: Isn’t Investing in My Own Business the Only Plausible Option?
A: Investment planning might not seem necessary when you have your own business — you just pour your money back into it, right? Wrong! Many owners finance their small businesses, and if you're operating in this fashion, it means your business is likely your only significant investment.
Although this might give you better control over your returns, you are also taking a very concentrated risk by putting all your money in one place. Your investment plan should allow you to finance your business operations as needed while also giving you a diverse, strategic portfolio.
*There is no guarantee that a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not protect against market risk. No strategy assures a profit and protects against loss.
Q: I Started My Business Without Any Help. Can’t I Handle the Finances Myself?
A: Putting together a financial plan for your personal needs requires insight into many departments. These areas include:
- tax planning
- investment strategies
- risk management
- and retirement plans.
Owning a business adds an additional level to the planning necessary for every one of these areas. The independent spirit and drive that you used to start your business might have gotten you this far, but you will spread yourself too thin if you try to handle all the financial issues on your own. Guidance from people with professional expertise will allow you to make better choices and focus on your business.
Your business's success hinges on your ability to do your job. Delegate the financial issues to qualified professionals, so you can operate the way you see fit. For more information about why financial planning for business owners is a good idea, or for help managing your finances, get in touch with Cornerstone Financial Management, LLC today.