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Simple steps to a financially sound small business

From making a financial plan to creating an exit strategy, here are some helpful tips for establishing and running your small business. 

Running a聽聽can be a rewarding experience, but without solid financial planning, it can also be a harrowing one. By working closely with a financial advisor and following a few simple rules, business owners can avoid some of the most common pitfalls.

Create a financial plan

It seems obvious, but it鈥檚 worth noting that you need a basic cash-flow and聽聽plan. Knowing your personal income and expenses helps you plan and predict business income and expenses. It also allows you to calculate how much you can afford to pay yourself. Trying to run a business without a clear financial plan is like trying to drive at night without headlights 鈥� you might get home without a scratch, but chances are you鈥檒l hit some major obstacles.

Empower your employees

A great way to retain and instill loyalty in employees is by offering them a diverse benefits package. Some benefits can be offered relatively inexpensively 鈥斅爁or example, a 3% match of retirement plan contributions, based on company performance. Other common benefits include life, health and disability insurance, plus non-monetary benefits such as flex time, unlimited vacation and the ability to work remotely when appropriate.

Maximize your own contributions

In my practice, we offer a聽聽retirement plan,聽with a 3% matching contribution by the employer.聽In 2015, a SIMPLE IRA plan has a maximum contribution of $12,500 for employees. To make this easier and to help with business and personal cash flow, break this amount into monthly contributions. Also, don鈥檛 forget to include a matching contribution for yourself as well as your employees. This match qualifies as a tax-deductible business expense.

Reinvest extra capital

If your goal is to grow your business, definitely focus on reinvesting extra capital in the company rather than pocketing it. But that can change if you鈥檙e getting ready to sell the business. In that case, the best strategy may be to focus less on reinvestment and more on compensating yourself appropriately.

Plan for the future

In addition to helping small-business owners navigate and put together benefits packages for their employees, financial advisors can help with succession and continuity planning, in order to create a smooth path for the company when the owner gets near retirement. Financial advisors can organize and lay out a plan for the owner, taking into account financial needs as well as other life goals.

Create an exit strategy

The best exit strategy is the one that fits the owner鈥檚 goals. Does holding onto the business fit those goals, or is a聽聽a better fit? One smart step is to review your vision and mission statements to remind yourself why you started this business in the first place. This should help clarify what your priorities were 鈥� and are. You might conclude that your most important goal is to leave a legacy and do good for the world, which could cause you to lean toward holding onto the business rather than selling. It鈥檚 not always about the money.

Build a dream team

Use your financial advisor as a kind of 鈥渜uarterback鈥� to assemble a team of advisors to take care of all your needs. The team members should take into account what the business owner鈥檚 goals are personally and professionally. In my practice, where we do comprehensive financial planning, we have all the details about someone鈥檚 financial picture and are able to see all the angles of the plan and determine where the land mines could be. Where we may not have complete expertise, we can help bring in experts including CPAs, attorneys, insurance agents and real estate agents. The financial advisor can also take a lead role in making sure the team communicates effectively, so that the client鈥檚 financial plan is seamless聽and well monitored.

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