Five Financial Tips for Small Business Owners
Having a Firm Hold on Your Finances is Crucial to Your Company’s Success
Small businesses are vital to the U.S. economy, employing half of the private-sector workers in our country. They also create 1.6 million net new jobs annually, according to federal data. As of 2020, there are 31.7 million small businesses in America, which accounts for 99.9% of U.S. businesses.
Despite an integral part they play in the economy, small businesses often struggle to find success. In fact, the U.S. Bureau of Labor Statistics has reported that 20% of small businesses fail within the first year of opening and only one-third of businesses are able to survive the 10-year mark. The leading cause small businesses cite as the reason they were forced to shut their doors is – you guessed it – cash flow problems.
When it comes to the success of your small business, having a strong wealth management strategy in place and practicing smart money habits can play a significant role in your long-term success. Follow these five tips to help keep your business on track.
1. Create a budget and honor it.
The first stepping stone to financial security for any one – individual or business – is creating a budget and sticking to it. Additionally, put in place a reliable and routine practice that monitors your cash flow needs in the short term. Not only is it important to know where your cash is going, but having a solid grasp on what your cash flow will look like in the future is incredibly valuable. Check out these apps that can be useful in creating your business budget.
Be careful not to take out too many loans or lines of credit without a clear plan on how you’ll spend the money and how you’ll pay it back. Use loans to pay down any unnecessary expenses that will allow you to focus your attention and resources on longer-term investments in your business.
SEE ALSO: Small Business Checklist: How to Assess Your Financial Wellness
2. Prioritize Savings
We all understand the miracle of compounding, and we also know that there is only one number that does not experience this miracle – zero. So, save something, anything. No amount is too small. Think about the future of your business and what you want to see happen, establish a savings goal, and create a plan to make that goal possible.
3. Invest in Your Business
When your business experiences increased profit or unexpected growth, it can be tempting to celebrate your success and treat yourself. While it is important to celebrate your victories, be sure that you don’t lose sight of your long-term goals. Reinvesting your capital back into the business can be a great way to continue your growth trajectory. Consider hiring more people, investing more in marketing, or incorporating updated technologies to help your businesses succeed.
4. Pay Attention to Your Personal Finances
This is a big one. As a small business owner, it can be easy to get so caught up in the logistics and responsibilities that come with owning a business that you let your personal finances fall to the wayside. Many companies offer their employees retirement savings account options or healthcare, but for entrepreneurs, it’s typically up to you to plan for your retirement on your own.
SEE ALSO: Why Bankruptcy Can Sometimes be the Right Option for Your Business
Be sure that you have a plan in place for your personal finances, and that you pay it just as much attention – if not more – than your business finances. You’ve got to plan for the long-term, so consider what your needs will be once you retire and leave your business behind. Additionally, don’t forget to be saving money for your own rainy-day fund rather than putting all your extra capital back into the business. Most experts recommend a personal emergency fund with three to six months of expenses.
5. Don’t Shy Away from Asking for Help
While most small business owners know a lot about their field of work, that doesn’t necessarily mean that they’re knowledgeable about finances or accounting. Don’t be afraid to seek out professional help as you create a wealth management strategy for your business. Hiring a financial advisor that is an expert in small business finances can help ensure that you’re turning all of your hard work into tangible, long-term success.
Is Your Small Business on Firm Financial Footing?
As a business owner, you work hard for your business, most likely sacrificing a significant amount to make your vision become a reality. At Paces Ferry Wealth, our advisors will work just as hard side-by-side with you to help you nurture your dream, build your wealth, and establish your legacy. If you’d like to schedule an appointment with one of our financial advisors to go over a financial strategy for your business, contact us today!
Paces Ferry Wealth Advisors, LLC is a registered investment advisor with the U.S. Securities and Exchange Commission (“SEC”). This material is intended for informational purposes only. It should not be construed as legal or tax advice and is not intended to replace the advice of a qualified attorney or tax advisor.
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