As an entrepreneur, you want long-term stability. But you also want enough wiggle room to implement innovative or high-risk/high-reward practices whenever you sense a good opportunity. Efficient financial planning is the key to achieving these goals; below we explore some ways in which you can achieve this.
Seek professional help
Getting an external opinion can be a good start. A financial adviser can provide you with specific help on a problem within your business – and it comes without emotional bias. Just make sure your adviser comes with solid recommendations and that they can be trusted.
Separate business and personal goals
Personal and business goals can often compromise each other. What takes priority when you want to invest in an area of your business but save for a holiday at the same time? When these two aims become blurred you can make mistakes that damage your business. Set long term goals for both yourself and your business (perhaps over five to ten years) and make sure you come up with a plan to achieve both.
Have an emergency fund
Financial planners suggest that you should always have three to six months of living expenses saved in case of an emergency. With a business as well, you might want to extend this fund. If there’s a lean period for the business, you’ll want money saved up to ensure that your cashflow remains solid. An emergency fund should insulate you from disaster and give you peace of mind going forward.
Plan and save for retirement
What do you want from your retirement and when do you want to take it? Make sure your long-term business plans align with these ambitions. The key is to plan to have enough money to make your retirement work. Set up regular automated payments to your savings to accumulate enough money to fund your personal hopes and dreams. And plan ahead by pledging to set aside a certain amount each year.
Create succession/exit plans
Planning when to leave your business is a natural part of the business cycle. In a succession, you’re working out who to hand over the management of the business to. Meanwhile, with an exit plan you’ll be working out when to sell or shut down the business. Before building these strategies, ensure that you’re aware of the market value of your business – expert advice could be crucial here. Then, if you’re handing over the business, make sure the new leader has the adequate training.
Financial planning is central to getting the most out of your business. Although it can seem daunting, by following the above advice you should be able to ensure that your business works for you.