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Financial Planning for Small Businesses

<b>What Constitutes Financial Planning for Small Business?</b>

What Constitutes Financial Planning for Small Business?

Beginning the process of financially planning for the future may feel daunting, particularly for small business owners, but the process becomes much more approachable once clearly broken down. There are eight main aspects to consider for a comprehensive financial plan. These include goal setting, funding options, liquidity, cash flow, taxes, risk management, succession and exit planning, and retirement.

Goal Setting

Initial goal setting is fundamental, but for long-term financial planning, small business owners need to intentionally separate their personal goals from their business goals. They may appear to overlap in many areas, but purposefully separating the two helps prevent either from being unintentionally and/or unnecessarily harmed due to entanglement. This may be done independently but is best planned and organized with the assistance of a professional financial planner.

Funding Options

Assess your funding options and do your best to diversify them. Many business owners are mostly or entirely self-funded, a course which certainly comes with its own set of pros and cons. Whatever the method of funding utilized to get off the ground, the next step is to explore additional options and diversify them. Diversification helps protect business owners' interests, particularly if personal capital is involved, and manage financial risks in the long run.


Assess how many of your assets are liquid. Gauging this aspect of the business is integral to financial planning and wealth management; readily available liquid capital serves as a short-term buffer that protects interests and mitigates risk. The goal is to have more assets than liabilities. This is another aspect of financial planning for small businesses that is best reviewed with a professional financial advisor, even more so for first-time owners.

Cash Flow

Cash flow forms the basis of a healthy business operation. Similar to liquidity, a focus on acquiring and maintaining a healthy cash flow protects interests and minimizes risk by acting as a financial buffer. To assess this aspect of your business, a formal cash flow analysis should be performed.


Taxes are a make-or-break aspect of operating a business. Large businesses may notoriously get in trouble for dodging taxes, but small businesses find their Achilles' heel in not knowing how to do them or doing them improperly. Additionally, a potentially fatal flaw is attempting to structure a business to minimize taxes. Seek the assistance of a financial advisor to make sure this aspect of planning is properly completed and managed.

Risk Management

This aspect of planning tends to fall at the bottom of the priority list for many small business owners, but it is nonetheless integral for long-term success. Create a list of potential adverse events and then devise plans to have in place should one or more come to pass. Some plans may only need to be implemented in case of emergency, while other aspects of risk management involve preventative measures, such as cybersecurity insurance.

Succession and Exit Planning

Succession involves handing the business over to another once the owner's time steering the wheel has reached its end. Exit planning, on the other hand, involves shutting down the business at a certain time. This time could be upon the owner's retirement or other such circumstances. In either case, this is a very long-term plan and may take time to ultimately decide upon.


Lastly, small business owners should plan for their eventual retirement. This is an undertaking all its own, even without an entrepreneurial venture involved. It is best discussed and planned for with the assistance of a professional.

Choosing a Retirement Plan that Fits Your Business

Choosing a Retirement Plan that Fits Your Business

To choose a plan, it’s important to ask yourself four key questions.

Frequently Asked Questions

Q: Who Should Hire a Small Business Financial Advisor?

A: Any small business owner may benefit from hiring a financial advisor. Those who stand to particularly benefit, however, include individuals with little to no prior entrepreneurial experience, those with significant personal obligations (such as family obligations which would limit an owner's time to navigate such planning on their own), and those who have self-invested or otherwise have a lot at stake should business or planning go awry.

Q: How Can a Financial Advisor Help My Business?

A: Financial advisors help small business owners minimize risk and boost chances of long-term success by taking the necessary steps to avoid common pitfalls and business busting mistakes. Once a business becomes profitable, advisors help to manage assets and plan for the future to best protect both the business and the owner or owners themselves.

Q: Can a Small Business Financial Advisor Save Me Time?

A: Absolutely. Whereas someone new to entrepreneurship may struggle to navigate planning independently, a professional financial advisor knows the ropes. Furthermore, utilizing the services of an advisor allows you to spend more time focusing your attention elsewhere — spending time with family or working on the business — rather than spending it navigating the complexities of financial planning.

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