5 Keys To Good Financial Planning for New Entrepreneurs

People seem to have a clear idea of what they want for themselves when it comes to financial planning for their personal life, but a lot of business owners ask me, what does it mean to do financial planning for your business?

Fundamentally, there are always six keys areas to consider, just like on the personal side. These six areas would include:

Current Foundation – This covers your debt, cash flow, cash reserves and how you manage your day-to-day business. This is where most new small business owners place most of their attention.
Risk Management – Whenever you see the word “risk,” just remember that it’s a fancy name for insurance. Without going into all of the types, insurance connected to your business is simply to protect everything relevant to your business, from computers and equipment to your actual ability to earn income and cover expenses.
Investing – Most people think of small business retirement plans as the only thing that falls under the investing category, but it can also address buying business-owned real estate and taking a laddered approach to organizing cash.
Taxes – With taxes, you want to make sure you’re taking advantage of all of the deductions, deferrals and depreciation you qualify for, and have a way to track and manage those things so you’re not stuck with a grocery bag full of receipts, come tax time!
Goal Planning – This starts to overlap with Strategic Planning; the distinction I make between the two is that ongoing financial planning will translate strategy into specific behaviors you perform every day that bring you back to your financial goals, and then monitor progress.
Succession Planning – For most people, the idea of transition OUT of their business is VERY far away. Succession planning asks how you plan to finish this business both as planned and in case of emergency.

Business financial planning covers a lot of territory; for young entrepreneurs, there are 5 steps they can take-not encompassing ALL of these areas-but 5 steps that really take them from acting like a “hobby-preneur” to an established business owner:

Use financial management software. I know a lot of entrepreneurs in the early years just hold onto receipts for tax time, and believe me, you cannot understand your profitability until you have an ongoing system that captures income and expenses. It doesn’t have to be complicated and Intuit even has a Sole Proprietor Quick Books version, but this is an issue of respecting what you inspect and using it to plan your next moves.

Hire a bookkeeper. The best money I ever spend is on SOMEONE ELSE to keep my books organized so I can go do the thing that I do well-and I don’t think ANYONE who is not a bookkeeper should be spending time balancing accounts and categorizing expenses. You can spend as little as $100 per month, but I encourage you to build it in to your budget early on, so that it becomes an expectation that you’re never stuck working on it yourself. And, make sure your financial management software has online access, because a lot of bookkeepers will give you better rates if they can access your stuff online, versus coming to your home or office.

Keep finances separate. Admittedly, there is an easy way to allocate personal spending when you’re tracking it, but why create the problem? Your income is REVENUE MINUS EXPENSES. Get a separate account at your same bank that you have your personal account at, and it’s simple. Also, if you have a business structure other than sole proprietor, you can lose your liability protection if the prosecutor can show that you were commingling. See your attorney if you have concerns about that!

Establish business credit. Even if you are a sole proprietor, I encourage you to get a Federal Employer Identification Number or EIN, even if you don’t intend to hire employees. The EIN is like your business’s social security number, and you can start establishing credit in its name apart from your own personal credit. When you get that separate bank account, open it in the name of the business and EIN, and then get the credit card that usually goes along with it. You’ll need to speak to an attorney to get your EIN, one who handles business formation, and they can also tell you the best business entity to use.

Find and exploit your key business drivers. When I go into a business, I can usually identify specific activities that the entrepreneur engages in to acquire more clients or sales, and with financial reporting, we can analyze, adjust and adapt behavior to get the result they want. When I coach other financial advisors, it always breaks down into more face time, which can translate into simply phoning clients to holding more marketing events, depending on their specific goals. With another client, his driver was scheduled appointments. We found he was at his capacity, so he brought in an associate and was able to schedule appointments sooner. Consequently, new clients didn’t have to wait as long to get into the system, and his income automatically went up 20%.

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Effective Financial Planning For Businesses

Financial planning is paramount to the success of any company, whether that business is just starting up or well established. An organization or corporation can have a solid objective and a good idea about where their business is headed, but until these goals are affordable enough to pursue, growth will be at a standstill. Financial planning allows businesses to assess their vision and reorganize their goals in order to achieve success.

Financial planning is imperative for the success of any business – at every level of operation. Whether a person is running a lemonade stand or managing the financial department of a Fortune 500 company, sound financial planning can make or break the success of a business. Unfortunately, a clever motto and a rock solid business plan can only get you so far. If your business goals aren’t actually achievable, your company will run out of funding and eventually jobs will be lost and growth will become stagnant.

However, you can eliminate the guesswork when it comes to business financial planning. There are services offered by reputable companies that specialize in helping start-up businesses get off the ground and helping experienced companies optimize their financial plans. These financial service providers have accountants that work directly with each client, allowing for streamlined communication and the development of a solid financial plan. In this way, financial advisors help companies of all sizes maximize profits and successfully achieve their business goals.

Experienced financial planners can also help solve existing problems a company may be facing. Whether a company is in debt or on its way into debt, financial planners can create forward-looking proposals that span years in advance to help businesses formulate the best plan possible given the company’s unique financial circumstances. A proven financial advising firm can also help set up an in-house accounting system and even offer helpful investment and tax advice. When seeking the right financial advisor, however, it is essential to look for accountants that have a positive track record of success and can offer affirmative feedback from past and current clients.

Financial planning for businesses is a vital element for success. A sound business plan can be created and amended at any point in a company’s lifetime and can be used to guide the company through constructive changes and positive growth. Most importantly, plans can help corporate executives make future decisions when it comes to business agreements and expansion in an evolving market.

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Business Financial Planning – A Helping Hand

If you’re a small business owner, then you already know that just about everything you’ve been taught about your business financial planning is a bunch of garbage. Yes, I called it garbage because it’s not designed to help you build wealth…

So here’s the truth…

Nearly everything being taught about business financial planning in the marketplace, on TV, and in print is designed for one purpose – to separate you from your money and to get it into their company’s control.

Because you own a small business you already understand how to make money, but if you’re like so many others – you’re not exactly sure what you should be doing in terms of investing for the future, getting a reliable return on your money, or how to structure your overall financial plan in a way that optimizes your cash flow.

So what should you do?

Who should you trust?

Those are both important questions, and I’m going to help you with how to find the answer… but I’m going to warn you in advance that it means that you’re going to have to think for yourself.

The first rule of business financial planning is that no one cares about your money or success as much as you do. Period. It’s just the same as acknowledging that no one else cares about the success of your business as much as you do.

It’s not that they are bad people or bad advisers, it’s just that they care more about their own bottom line than they do yours… it’s human nature.

That means that you’re going to have to be accountable for your own money and you can’t just turn it over to a so called “Financial Expert” and trust that they are going to take as good a care of your money as you do… It just doesn’t work that way and if you need proof, look at the American public.

The majority of them have put money away in investments and followed the mainstream advice about how to grow wealth, but reality is showing that this hasn’t worked for most people and the majority of them are relying on dwindling savings & social security to help them scrape by…

This is what happens to most people when they don’t take responsibility of their own success – and it doesn’t have to happen to you…

So, now that we’ve established that you can’t delegate growing your wealth, the next question you need to answer is this…

Does it make more sense to invest your time, money, and resources into something that you understand really well, or something that you don’t really understand? If you agree that investing in things you understand makes more sense then look at what you’ve done up to this point…

Do you know where your money is invested?

Do you understand how those investments work?

If not, it may be time to reconsider where you’re putting all of your resources.

The next question is similar… Does it make more sense to invest in things where you have control of your money, or to invest in things that are out of your control?

That means “Can you effect the outcome of your investments?” or “If things started to go wrong, could you do anything about it?” or “In the case of an emergency, do you have access to your own money?”

If you agree that no one will take as good a care of your personal finances as you will, then it’s clear that investing those hard earned dollars into things where you have control also makes sense.

These are just few considerations when learning business personal finances, but where do you go from here?

The next step is for you to invest in yourself and your understanding of how to build and manage your finances in the same way that you’ve invested in learning how to make your business successful.

Begin thinking for yourself, take the time to learn the skills involved in how to manage and invest your money properly, and you’ll begin to see the world of personal finances for you as a small business owner change for the better.

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A Good Business Financial Plan

A business plan is one of the most significant channels to ascertain if a business model of strategies would be effective or not. It is a thorough word diagram encircling all financial aspects of the company as well as predicting future possibilities for the business. It is where you should regress to disregard of whether things go wrong or right. The plan can be used as a comprehensive outline of financial affairs of one’s company that should include information such as cash inflow, start up costs, operational costs and other relevant details of the business.

There are few options available when it comes to business financial planning. If you are having a small business operated at home then your personal savings should be sufficient for you to begin your business. Just take note that some funds should be reserved in your account in case there is emergency use. If you are lack of capital you may approach your family or friends to seek financial help from them but remember to think twice as you would be risking their money. It is alright if you are certainly sure that your business will pull a winning return but if you are not then stay off from borrowing from your immediate ones as good relationships could be destroyed due to monetary problems.

Another option would be getting financial loan from banks or credit unions. This will involve meeting the bank authority where you propose your business plan and convince them that your business is going to make a return and no doubt you will be able to repay the loan. Or you could look for investors or sponsors to aid your business financially. This may be difficult and you might need an irresistible business venture to lure people to invest in your business.

The business financial planning document is the most important record to start off a new business endeavor or to finance the growth of an existing company. There are many other business documents and they are all very important in the business. But certainly a business’ affair will narrow down to attracting customers to keep your sales going.

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