October is financial planning month! It might be close to Halloween, but having a financial plan for your small business doesn’t need to be scary! Get ready for the year ahead with some easy small business financial planning guidelines that will give you more treats than tricks.
Small business owners and entrepreneurs have big dreams and a lot of drive. Sometimes we get caught up in running the business from day to day that we forget long term financial goals that will keep us secure long after we close our doors or move on to something new.
When you start your business, you likely created a business plan that provided details on the markets you were going to target, your customer profile and some pro forma projections for the first few years. Did you also include a financial plan that details how you will set yourself up for financial success and reduce the risk of starting your entity?
It’s never too late to prepare a financial plan and put it into action!
Here’s a list of tips for setting up a financial plan and which areas of planning you should consider.
Spooktacular Planning Tips:
- Identify Business and Personal Financial Goals
When you’re just starting your business, or working on growing your business, you can lose sight of what is important for the business vs what is important for you personally. Take time to identify long and short-term goals that mean success for the business. Then take time to determine the long and short-term goals that mean your personal financial success is set!
- Revenue Review
You might be making a killing in sales, but have you looked at your net revenue? If your expenses are greater than your income, you need to look at where you can cut costs, increase sales, or bring in other revenue streams. Be sure to include the longer-term retirement goals. This includes providing 401k or retirement planning options for your employees.
- Cash Flow and Liquidity
Similar to revenue, you may have a lot of business going out your doors, but don’t have the cash on hand. Being cash flow positive or more liquid can help provide funds for growth and expansion, being prepared for emergencies, or offering more perks to employees.
- Funding Options
When you started your business, you probably put a lot of your own money and resources into the startup. As you start to consider how to pay yourself back, reduce your exposure, or perhaps explore expansion, it’s always a good idea to have outside funding.
You can consider loans, investors, providing equity in exchange for services, or exploring alternative lending options, like invoice or purchase order financing.
Now that we’ve talked about areas to consider for your financial plan, let’s talk about what types of goals you should include in your plan.
Freakishly Smart Saving:
Let’s be honest, as much as you love being the boss, there may come a time when you don’t want to work, or can’t work.
Creating a company retirement plan is a good idea for your own portfolio, but can also be a way to keep or attract employees. Check with your local agencies to determine the laws associated with retirement plans.
- Estate Planning
Having a will and trust created for your personal assets is a pretty standard practice. As your business grows and becomes more valuable, you should review and update these documents. Should something happen before you sell or retire from the business, you’ll want to identify how the business will be organized, whether you want charitable trusts, or the best ways to reduce estate taxes.
- Next in Line
Whether you eventually retire, sell, or pass on the business you’ve created, you’ll need to plan for a successor. This will help ease your transition as the company leader and will prompt you to consider the tax and other financial implications.
It may seem like a lot to plan and consider, but like any investment, you want to protect the time and money you’ve put into your business. Having a sound financial plan will only make your business more successful and attractive to future investors or buyers.