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Financial experts applaud the drive and commitment of these small business owners, but warn that they must also consider their personal financial future.Here are eight financial planning tips for small business owners.- Hopefully your business will have proved such a success that it results in many years residing in tropical paradises before your passing. Have you ensured that when you die your personal assets, including your business, is transferred as you wish?
The most difficult hurdle for many small businesses is securing funding, and entrepreneurs often turn to their savings, credit cards, or friends and family for start-up capital.
Financial advisors also urge owners to look for outside sources, such as a loan or offering equity in exchange for a good or service.
- At some time you are going to need capital and/or investment.
Seek out your options; secured/unsecured business loans, start-up finance, invoice finance, private equity funding, personal savings etc., as these will allow you to strategise your financial planning accordingly.
To better align business and personal financial planning, advisors suggest a company retirement plan.
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A 401(k) plan allows for the highest contribution, and company matching is an excellent way to maintain employee loyalty.
If your business is scalable, allow for self-funding but if you need to look at external sources of finance, ensure you know what they are, where you can get them and how much they will cost you.
- If you are aware of your costs, sales and product demand, you can ensure that you are well-positioned to make a profit.
Creating a will and family trust will ensure that an individual’s personal and business assets are properly managed in the event of his or her death.
If a business owner must leave his or her position within the company, a business succession plan will enable a smooth transition in leadership and address many tax and financial matters.