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Financial Planning for Business Owners: A Starter Guide

Financial planning for business owners is not the same as financial planning for businesses. As a business owner, it’s important for you to know the difference between the two and actively engage in both.

What Makes a Financial Plan for Business Owners Different?

The difference all comes down to the word “owner.” Financial planning for your business is all about helping you understand where your business currently stands and where it aims to be financially—and it’s often the purview of your business’s CPA.

Financial planning for business owners, on the other hand, focuses on helping you manage your personal finances. It takes into account all the diverse—and often hard-to-juggle—financial goals you may have, not only as an entrepreneur, but as a parent/family member, a charitable donor, an aspiring retiree, and more.

As a business owner, you should have a trusted financial advisor who can help you create this type of personal financial plan—and who will work with your accountant to make sure that your personal financial plan works in tandem with your business’s financial plan.

Need guidance now? Advent Partners specializes in financial planning for business owners. Schedule a consultation with us.

The Biggest Financial Planning Mistake that Business Owners Make

Many business owners think that they don’t need personal financial planning. One common misperception is that business owners don’t need to worry about getting financial advice until after they’ve sold their business. However, the best prepared business owners start financial planning early, long before the idea of selling becomes a reality. The earlier you start, you better prepared you’ll be for anything over the lifecycle of your business.

Many business owners also believe that having a financial planner is only for people with money to invest in the market. “I invest everything in my business, so there’s not much a  financial planner can do for me,” they believe. But the reality is a good financial planner can help a business owner with so much more than investment management. Let’s see how.

What Does a Good Financial Plan for Business Owners Look Like?

Financial planning for business owners starts with one big question: what is your end game? Are you building your business to sell it, transfer it to a family member, or some other exit strategy? Once you understand your ultimate goal as a business owner, you and your financial advisor can create a comprehensive plan to help you reach that goal. Here are some of the priorities that financial planning for business owners focuses on.

Business Structure

How your business is structured significantly impacts your taxes and liabilities as a business owner. Are you better off as a sole proprietorship, an LLC, an S corporation, or a C corporation? Financial planning can show you the pros and cons of each.

Employer-Sponsored Retirement Plans

What type of retirement plan makes the most sense for your business and your own retirement goals? Good financial planning looks at multiple factors, from number of employees to the health of your cash flow, to help you make the smart choice.

Executive Compensation & Profit Sharing

As a business owner, determining how you get paid is an important decision beyond the base numbers. Do you set a salary for yourself or pay yourself in distributions? Are there multiple owners/shareholders taking salaries and/or distributions? And are you taking advantage of opportunities like qualified business income deductions? All these decisions bring with them major tax implications that financial planning can help you understand.

Liquidity for Emergencies & Opportunities

Does your business have the right cash reserves or lines of credit? Can you as the business owner quickly infuse liquidity into your company if needed? Financial planning can make sure both you and your business are covered if things go wrong.

Business Continuation Plan

If you’re like most entrepreneurs, you don’t have time to map out what will happen to your business if something happens to you. But even a short-term disability can be devastating for your business. A good financial advisor will make sure you have a clear plan in place to ensure that your business not only survives, but also thrives and retains its value in your absence.

Make sure your business is ready. Sit down for a get-to-know-us chat with our financial planning team that specializes in helping business owners like you. Get started here.

Employee Retention Strategies

Who are the key employees you need to retain in order to protect the value of your business? With the help of a financial advisor, you can develop short- and long-term financial incentives, equity purchase options, executive bonus structures, and other compensation strategies to keep your best talent loyal to your business.

Business Succession Plan

Remember the big question from above: what’s your end game? If you want to give the business to a family member, how will you fund your retirement? If you plan to sell your business and use the proceeds in retirement, how do you make sure you retire at the right time? And did you know you can donate all or a portion of your business to charity and reap significant tax benefits? Financial planning makes sure you have the right exit strategy in place for you.

How to Get Your Financial Planning Started

There are many other factors that financial planning for business owners takes into account, including personal estate planning, business and personal insurance coverage, and special project or acquisition financing. It also requires significant coordination with all your professional services providers, such as your CPA, your benefits coordinator, your insurance agents, and your attorneys.

If you’re like most business owners, you simply don’t have the time to evaluate all these factors or connect all these dots. In that case, the best place to start is to schedule an initial consultation with an advisor who specializes in financial planning for business owners.

Look for a financial advisor who can understand all the complexities of your business, takes the time to educate you on your options, and will proactively work with all your other professional services providers as your financial “quarterback.” It’s one of the most important decisions you can make to protect the value of the business your building, achieve your retirement goals, and create a meaningful personal and professional legacy.

Ready to Embark on your Financial Planning Journey?

Schedule an introductory meeting with Advent Partners today. Our Certified Financial Planners specialize in financial planning for business owners like you and are ready to guide you every step of the way and help you create a robust financial plan that ensures your business, your family, and you are ready for good.