A group of people reviewing documents outside. BECU Investment Services logo.

Financial Planning for Small Business Owners

Explore strategies for building a financial roadmap for your small business.

Share

BECU Investment Services

Check the background of investment professionals associated with this site on FINRA's BrokerCheck.

Financial planning is a critical element for the success of any small business owner. It provides a roadmap for working toward both short-term and long-term goals and can help improve the financial health of the business. However, small business owners often have a lot of different jobs and manage numerous responsibilities, which can make it challenging to focus on financial planning. It is crucial not to be too busy to plan, which can lead to missed opportunities and increased risks.

Here are a few essential financial planning strategies for small business owners, including how to separate personal financial goals from business goals, consider alternative funding options, plan for retirement, prepare exit strategies, and the importance of making time for planning.

Separate Your Personal Financial Goals From Your Business Goals

Small business owners often invest a significant portion of their financial resources into their businesses. While this shows commitment and belief in the business, it can blur the lines between personal and business finances. It's essential to separate these to ensure that personal financial security isn't entirely tied up with the success of the business.

To achieve this separation, create distinct financial plans for personal and business finances. Set specific goals for each and monitor them independently. For instance, you may want to save for a personal goal, such as a child's education, while also aiming to grow your business revenue by a certain percentage.

Consider Alternative Funding Options To Diversify Business-Related Risks

Many small business owners rely on a single source of funding, often their own savings or a loan from a single lender. This can increase risk because if the business fails, it can take the owner's personal finances down with it. Diversifying funding sources can help mitigate this risk.

Look into alternative funding options such as business grants, venture capital, crowdfunding, or angel investors. Each of these can offer not just capital but also diverse business experience and networks. They can also cushion your business against economic downturns or unexpected financial challenges.

Remember To Plan for Retirement

For small business owners, the line between the business and personal life is often so thin that retirement planning can be overlooked. Unlike employees who may have employer-sponsored retirement plans, small business owners are responsible for setting up and contributing to their retirement plans.

Options such as a SEP IRA, SIMPLE IRA, or a Solo 401(k) can be beneficial. These plans not only help in saving for retirement but also offer tax advantages. It can be beneficial to work with a financial advisor to help you determine which retirement plan is most suitable and to regularly contribute to it.

Prepare Your Exit Strategies

Exit strategies are a critical component of financial planning for small business owners. Whether you plan to sell the business, pass it on to family members, or close it down, having an exit strategy in place can help you financially prepare for the future.

Consider the valuation of your business, how a sale might be structured, and the tax implications of various exit strategies. Planning for these eventualities in advance can greatly increase the chances of a favorable outcome when the time comes.

Don't Be Too Busy To Plan

Often, small business owners are so immersed in day-to-day operations that they neglect long-term financial planning. However, planning should be a continuous and integral part of managing a small business. Regularly set aside time to review and update financial goals, analyze business performance, and adjust strategies as necessary.

Creating a financial calendar can be helpful, where you set dates for reviewing your financial plans, like how you would schedule regular business operations. This ensures that financial planning remains a priority.

Planning Really Matters

Financial planning should not be an afterthought for small business owners. It is a necessity that underpins the stability and growth of both the business and the personal lives of the owners. By separating personal and business finances, exploring diverse funding options, considering retirement planning, preparing exit strategies, and dedicating time to plan, small business owners can build a more secure and prosperous future. Remember, the time spent planning today can potentially save a significant amount of time and stress in the future, paving the way for both personal and business success.

Talk to a Financial Advisor

Financial advisors with BECU Investment Services are here to help. Our team will take the time to get to know you, understand your goals and plan and implement a financial strategy that's appropriate for you. Set up a complimentary consultation or call 206-439-5720.

Securities and advisory services are offered through LPL Financial (LPL), a registered investment advisor and broker-dealer (member FINRA/SIPC). Insurance products are offered through LPL or its licensed affiliates. BECU and BECU Investment Services are not registered as a broker-dealer or investment advisor. Registered representatives of LPL offer products and services using BECU Investment Services, and may also be employees of BECU. These products and services are being offered through LPL or its affiliates, which are separate entities from, and not affiliates of, BECU or BECU Investment Services. Securities and insurance offered through LPL or its affiliates are:

Not Insured by NCUA or Any Other Government Agency
Not Credit Union Guaranteed
Not Credit Union Deposits or Obligations
May Lose Value

Your Credit Union (“Financial Institution”) provides referrals to financial professionals of LPL Financial LLC (“LPL”) pursuant to an agreement that allows LPL to pay the Financial Institution for these referrals. This creates an incentive for the Financial Institution to make these referrals, resulting in a conflict of interest. The Financial Institution is not a current client of LPL for brokerage or advisory services.

Please read the LPL Financial Relationship Disclosure for more detailed information.

The LPL Financial registered representatives associated with this website may discuss and/or transact business only with residents of the states in which they are properly registered or licensed. No offers may be made or accepted from any resident of any other state.

Important Disclosures

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual security. To determine which investment(s) may be appropriate for you, consult your financial professional prior to investing.

This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax advisor.

All information is believed to be from reliable sources; however LPL Financial makes no representation as to its completeness or accuracy.

LPL Tracking #510391-01