Being a small business owner is not easy. You have to manage most of it on your own with little help from outside. Hiring more people isn’t an issue if not for the salaries and your budget. The success of your small business doesn’t just depend on your efforts and planning but also on the budget. How you manage the finances can decide how your business operates in the long term.
Financial planning is the first step to establishing your new small business. Registering the company requires money. Loans need collateral. You need investment money and working capital. Once the business is running, you have to consider the overheads and taxes. The list goes on and on.
We’ve created a guide for small business owners to plan finances properly and increase your chances of succeeding in this competitive market.
● Business Goals and Personal Goals are Different
For a business owner, the lines between your business and personal goals can blur easily. After all, you have to manage finances on both sides. But if you let this happen, it will create a tangled mess in both areas and lead to difficulties.
Write down your personal and business goals separately. Categorize them as immediate, near future, and long-term. The immediate goals need your attention first.
● Know Your Funding Options
Many startups and small businesses are self-funded. You will be investing your money into the business. But where this money comes from is the key question. For example, a business loan has to be repaid. Using credit card money can be very expensive and risky. If it’s your savings, you need to have enough set aside for emergencies. Look for more than one funding option to distribute the load.
● Take Salary
Just because it’s your business doesn’t mean you don’t have to take a salary. This is where small businesses end up swallowing most of your money. Fix your salary based on the market rate and add it to your account every month. This draws a line between business money and personal money.
The salary is your personal money but the earnings from the business are business money. Keep them in separate accounts and use them accordingly to pay for the expenses.
● Have a Plan for Risk Management
You cannot ignore risk management planning when running a business. Do you have a safety net in place in case of adversities? Take an insurance policy for yourself and your business. Always have an emergency/ contingency fund, and don’t touch it unless absolutely necessary. Take loans when you have a repayment strategy in place.
● Make Succession and Exit Plans
You need to be prepared for everything in a small business. If it is successful and grows into a mid-sized or large business, you need someone to take over someday. You have to train someone to understand the business as you do and handle the responsibility when you decide to step down.
At the same time, you also need to plan an exit strategy in case the business doesn’t do as expected. You have to liquidate the assets and come out with minimum losses in the worst-case scenario. How you wish to sell the business is a factor to consider if things go wrong.
● You Need a Retirement Plan
The previous point deals with your business. Now, you have to focus on your personal retirement plan. By when do you wish to retire? How much monthly income do you need to live comfortably post-retirement? Plan your savings, investments, insurance, etc., to provide you with enough money when you retire.
● Keep Accounts and Records Updated
Shabby accounting is a nightmare for any small business. As a business owner, you aree responsible for ensuring that every payment, expense, earning, sale, purchase, etc., are accounted for. Hire someone to update the records and take the help of an advisor to manage the finances.
● Hire a Financial Advisor
Do the above pointers sound overwhelming? That’s why you need to consult a financial advisor and work with them in managing your business and personal finances. The advisor will help you choose the right business structure, pay taxes (getting discounts), find worthy investment options, get insurance, diversify your portfolio, and plan for the long term (including retirement).
Make sure to hire an experienced and certified financial advisor with expertise in your niche. Read client testimonials and have a face-to-face meeting with the advisor before finalizing. Choose someone who understands your business and your working methodology.
TXTImpact is a leading business text marketing software provider in the US market. We work with small and medium businesses to provide customized and affordable business texting solutions. From setting up the software to integration and support, we offer end-to-end services to all our clients. Our clients belong to several industries and niches.
