Whether you are in the early stages a new business or in the start-up phase of building a business there are many financial planning decisions to make. Planning for potential future problems is important to ensure the continuation of the business is not impacted.
Business owners in the start-up phase tend to focus on getting their business running, finding customers and launching into the market place. Many business owners are often too busy with the day-to-day operations and often put off planning. A financial planner will help identify problems that may arise and protect owners and the business from the impact.
“Everybody has a plan until you get punched in the face.” – Mike Tyson
Three Important Planning Considerations in the Start-Up Phase:
Structure – What type of business structure do I need to set up? Setting up a business structure (sole proprietor, partnership, corporation) will have an impact on initial start up costs, control and flexibility in management, taxation of the business and individual owners, plus the business risks for the individual owners. The choice of the type of structure requires consultation from a business professional to ensure the structure is right for your business.
Cash Flow – What is the best and right type of financing for my business? What type of debt protection do I need? Many start up businesses have most of their capital invested and continue to reinvest in the business. This may result in business loans or limited cash flow in the early years. Ensuring the business can continue to repay loans in an unforeseen event is crucial for long-term success.
Key people – How do I protect my business if a key person is not able to work? As a business owner you and any business partners involved in the operations are key to the success of the business. An unexpected loss, sickness or injury could threaten business operations and success. Building a plan that protects current and future risks is vital to continuation of the business. Protecting income needs for the individual owners and their families should also be planned for.
Working with a team of business planning professionals such as financial planners, lawyers and accountants is vital. This team can help ensure problems are avoided or at least mitigated with proper planning. Building a network of trusted advisors will help you prioritize your goals and protect you from unforeseen risks.
The 2016 Small Business Owner Study conducted by Environics Research Group revealed entrepreneurs would handle some of their decisions and plans differently if they could start over. One of the top 10 things these business owners would have done differently was to seek out assistance from professionals such as financial advisors and lawyers.
If you have any questions about your business’s financial plan or how to find a financial advisor to work with you to develop yours, connect with us.