Top 8 tips for Business Owners
Financial Planning for Business Owners
We all need to plan our finances - we work too hard for our money to let it go un-directed. However, there are some special challenges for Business Owners in their financial plans. Here are our top 8 financial planning tips for Entrepreneurs and Businesspeople.
1. Separate your business and personal goals
Examples of Business planning Goals:
• Set up a fund to cover severance pay liability;
• Diversify investment of profits for future bad times;
• Insure key people in business;
• Retain staff with a pension plan;
• Put in place shareholders agreement;
Examples of Personal planning Goals:
• Set up a fund to cover the cost of Educating my children;
• Save for an overseas trip;
• Build / buy my own house;
• Have investment to fund our old age / retirement;
• Protect my family financially if I die.
2. Focus on liquidity
Even if the balance sheet shows that a business is financially sound, it doesn’t mean the assets are liquid.
The goal should be to have more assets than liabilities, so have a buffer to meet short-term financial obligations.
3. Predict your Cash flows
A healthy cash flow enables a business to meet current obligations, like paying employees and purchasing raw materials, while also building up a reserve for investments and emergencies.
Amassing assets (like equipment or inventory) is great but, if cash flow is a challenge, the business will stall.
4. Sort out Your Taxes
Tax planning can be complicated as a business owner
Outsourcing tax planning and preparation to a chartered accountancy firm will free up time, and may help reduce your tax liability.
5. Risk management
risks you may not currently be considering:
• business interruption due to a disaster;
• death of a key person;
• loss from theft or fraud;
• IT - cybersecurity risks.
Insure your assets – including the founder or other key leader, and mitigate your risks.
6. Succession and exit plans.
What’s your Exit plan?
If you wish to sell your company, you need an idea of the value. Even if you aren’t looking to sell, it’s smart to always have a ballpark idea of the business’ market value.
However, much of the business value is often tied to the value that the Founder of the business adds.
What’s your Succession plan?
This is a strategy to cede control of the business to one or more people (or an acquirer).
If the former, you should decide if you will pass the company on to a family member or an employee, and begin training.
7. Plan for old age / retirement
Retirement planning is crucial for everyone, business owner or not, but business owners are often guilty of thinking that they will be able to run their business forever.
This is linked to a succession or exit plan – “Will you be able to sell your business to fund your retirement?”
8. Create an Estate Plan
Provide for loved ones, business partners and employees who rely on the business.
Minimize tax exposure.
Provide clear instructions on how the business should proceed without the business owner.
Reach out to an SCI Financial Planner for confidential advice from a professional you can trust - email advice@scifinancial.com or call us on +267 318 0111 for a free discovery session