According to American College of Financial Services, 60% of business owners don’t consult a financial advisor. Yet the Small Business Administration documented that only 50% of small businesses are still around after five years. Here are some of the ways a professional financial planner can help you beat the odds.
Creating and Coordinating Business and Personal Goals
Most business owners start a business for very personal reasons. Yet they fail to coordinate their personal finances with those of their business. And what’s worse, given the demands of a new business, they may neglect their personal finances entirely. They miss the opportunities to maximize cash flow, investment returns, and tax planning as a concerted effort.
Planning for Profitability, Rather Than Cash Flow
A successful company generates both cash and profits, but the financial objectives are not always the same. Focusing on maximum short-term cash flow may affect long-term profitability. While setting ambitious, expensive business milestones may result in a business starved for cash. A financial planner can help you find the right balance so that cash and profitability work in harmony.
Helping Navigate the Stages of Business Growth
As a small business owner, you will wear many hats. This can be overwhelming. A professional can be invaluable, especially during the chaotic initial stages of a business. An experienced financial planner can help you navigate the maze of requirements you need to consider when you start a business in the areas of legal, banking, accounting, and insurance. As the business evolves, they can provide timely financial projections, insights in areas where you lack experience, and a sounding board to prevent things from going wrong.
Identifying the Best Retirement Plan
Choosing the right retirement plan is often the last thing a business owner thinks of. You may know there are tax advantages but are short on the details. And if you are unsure of your goals and are not coordinating your personal situation with that of your business, you may make a misstep. An advisor can help you choose the best plan for maximizing the funding of your own retirement account as well as rewarding key employees. They can also make you aware of the legal requirements involved so you make the best choice for your situation.
Taking a Proactive Approach to Business and Personal Tax Consequences
As a business owner, you are probably driven by your dream. However, thoughtful planning on the financial side can make the difference between a thriving business and becoming another statistic. A financial planner can serve as a liaison between you and your tax professional, making long-term success in terms of your personal situation and that of your business more likely.
Including Business Succession Planning in any Retirement Game Plan
Wilmington Trust conducted a private survey showing that 58% of small business owners have no succession plan. Successful business owners start their businesses with the end in mind — whether it is a future sale or transfer to employees or family — a good business plan incorporates an exit strategy. Skipping this step could be as disastrous for your heirs as leaving no will. A professional can help you coordinate your personal goals with those of your business and ensure your legacy.
Adjusting the Plan for Business and Life Transitions
If you are too busy with day-to-day responsibilities to think about the future, you are not alone. Business owners often fail to anticipate future changes to markets, technology, and circumstances that are critical to the stability and maintaining growth. The advantage of financial planning is that, viewed correctly, it is a work in progress. Your advisor can help you plan for and successfully navigate the bumps in the road that will inevitably happen.
So, while part of the allure of being a business owner is the desire to be the master of your own success, there are a number of financial issues that benefit from professional expertise.
CFP®, CEO & Managing Partner, Senior Wealth Advisor