By Ron Eckstam

The financial planning needs of business owners are far more complex than family planning. Your business is probably your biggest asset, your income for living, your biggest risk, and hopefully, the bundle of cash you will need for your next adventure – either the next business or your life after business.
Planning the business side also includes the family side so you won’t duplicate strategies or create gaps.
Here’s what every new business should know about financial planning:

1) Planning for succession.  As a solo owner, if you die or get disabled, who will make the decisions for your business? Can a family member or employee run it both strategically and tactically? If it needs to be sold, and you are not part of the deal, how much less is your business worth?

If there are multiple owners, can they come up with the cash to buy out your percentage of the business?  What value? What payout timing?  What if you’re the surviving partner? And often the ‘best’ question, how would you like being business partners with your deceased business partner’s spouse or children?

2) Retirement Planning. This is not a “one size fits all” solution. When you are starting, a personal IRA may be all you can afford. As you add employees, maybe the best solution is a SIMPLE IRA.  Then you grow and either a SEP or 401(k) might be the best solution.  Within each of these tools there are many planning options.

3) How do you reward and keep your key people (and this can mean YOU)?

4) Be familiar with the legal documents, insurance issues, investment issues and tax issues that impact the family.  Few have thought through the coordination of these issues with their business side planning.

5) Do you have a plan to create an adequate income stream for 20-30 years of retirement? It has people really worried.

6)  Don’t do piecemeal financial planning. The tendency of most new businesses is to focus on the business and not the financial planning. Truth is that it will have the No. 1 impact on your family. Don’t leave them out. 

7) You may not be able to implement a financial plan all at once.  Identify your goals, create an integrated business/family Plan, determine your priorities, review what tools are available,  and then implement it in pieces as time and cash flow permit.

8) Begin thinking about your long-term exit strategy for your business. Five years (plus or minus) before you want to sell you need to set out the steps to follow and how it impacts all of the above planning before and after the sale?

Securities and financial planning offered through LPL Financial, a Registered Investment Advisor.  
Member FINRA/SIPC