Running a small business requires wearing a lot of different hats. While you are juggling the many facets of your company, your business financial planning may have been put on the back burner. Taking time to address four key areas could make an enormous impact on your financial future and allow you to live the one life you have with confidence and comfort.
- What should you do with your excess cash?
Just like your personal finances, you should have emergency saving. However, that doesn’t mean you need it all as cash. Savings accounts at banks typically pay a low interest rate well below inflation rates. You can create an investment portfolio in your business that may allow you to beat inflation rates with your funds. Investing in mutual funds still gives you access to your money but will generally produce more interest than a savings account. - When is it time to start taking money out of the business for retirement?
After you’ve been running a business for a long time, you can incorporate in your financial plan various distributions to keep you on track for retirement. And there is flexibility to be able to put it back in case of emergency. You don’t have to sell your business to get money out of it. You are the owner and there are ways to do this efficiently and meet the IRS requirements for your business type. You can take planned, regular lump sum distributions if you are a sole proprietor or LLC owner. By making your distributions a planned event at regular intervals, you can make them a part of your retirement strategy. And just as you can take money out, you can put money back in if needed. - Do you need life insurance as part of your business plan?
What happens to your spouse if you pass away and own a business? The owner of the business should have adequate insurance in case of a pre-mature death. This will prompt an evaluation for your business so that you can get an appropriate amount of coverage. Another aspect is protecting the business in a loss of a critical employee. Many businesses would say that the people are the most important asset. They insure their other assets such as buildings or equipment but overlook doing the same for the employees who are critical to the business. You can purchase a “key person insurance” plan that can protect you from the sudden loss of a key employee. This is a person that would cause a significant setback to the business if they died or became disabled. - What employee benefits can you offer to retain employees?
Many employees are choosing jobs that not only offer a great paycheck and environment, but also how the company is investing back into them and their future. One way that small businesses are able to cultivate employee loyalty is through a desirable benefit package. There are a variety of options for small business owners – retirement and medical plans that allow maximizing contributions for the business owner, ones that keep administration easy and inexpensive, and ones that blend employer and employee contributions.
Each of these four areas are significant and have lasting impact. Talk with our experienced financial professionals about your unique circumstances and goals. Our job is to help you meet your future needs. Stop worrying about your goals and start planning for them.
All investments are subject to risk, including the risk of principal loss.