In 2018, there were over 30 million small businesses operating in the U.S.
But, many small businesses struggle to stay afloat due to poor financial planning. They have great ideas, goals, and ambitions, but the reality of running a business can sometimes be disheartening.
We’re taught to follow our dreams, but we also need practical tools to achieve small business success.
Financial planning is most definitely one of those skills that every business owner needs to know to be successful.
Want to learn five must-know financial planning tips for small businesses? Read on.
1. Plan Ahead
Many businesses fail because they simply don’t plan ahead. They may get stuck looking at their short-term finances instead of looking at the big picture.
Take a step back from the daily grind of your business and create a long-term plan for success. Determine how much money you can re-invest in your business and how much you need to set aside.
You also may want to consider getting a loan or additional capital. Before re-investing in your business, however, consider realistically what your financial projections are. Keeping mind that you should always have on hand at least 6 to 12 months of business expenses in assets and cash.
While it’s tempting to pour your heart, soul, and cash into your business all at once, sometimes this simply isn’t a wise choice.
2. Create Business Goals
Some small business owners get in the habit of hoping their business will succeed without changing their business strategy. If a business strategy has proven to not work over and over again, then it may be time to reevaluate your business goals.
Start by creating a budget and looking at your recent business expenses. From there, set financial goals and targets to achieve. If there are expenses you simply don’t need that can be reallocated to a new business strategy, then try to have the courage to change things up and try something new.
3. Consult with Experts
Surround yourself and your business with experts. This includes a lawyer, an insurance agent, and a tax advisor. All of these people will be key to ensuring the long-term success of your business.
Having a financial planner like FamilyVest is also a much-needed expert to have on hand.
A team of experts can help to make sure that your business is operating efficiently and legally as well. Come tax season, you’ll especially need your tax adviser’s help to get the most tax breaks and to determine how much you owe quarterly for the year.
4. Create a System of Financial Planning Tips
To successfully manage your small business finances, you need an effective system. You need to keep track of receipts, expenses, and sales. Your tax adviser can also be a vital part of your financial tracking system.
Keep a separate file for each of your business expense types and financial records. You can also scan these documents into an online system, but it’s a good idea to keep the original as well.
Keep a list of financial planning tips handy as well. Having this list on hand will help you to revisit financial advice until it becomes a part of your normal routine.
5. Set Boundaries
It’s easy for entrepreneurs to mesh together their dreams with their business goals. They get stuck thinking that their business is their identity which leads to personal and business finances getting linked together.
While it’s understandable to feel this, try to keep your business and personal goals separate. Reflect on what you’re personal goals are and how your business can or can’t help you to achieve these goals. Always have separate bank accounts and make sure to pay yourself first instead of investing everything back into the business.
Small Business Financial Planning Tips in Action
Learning financial planning tips and taking action is a daily practice. Year round, all business owners must keep a close watch on their finances to ensure their businesses are sustainable. But, with the right tools and skills, you can learn how to keep your business afloat and have a fulfilling personal life as well.
Need advice on what small business structure to choose? Check out our blog post to learn more.