As about 2/3rd's of today's affluent are self-made, they all started somewhere. With an idea, a dream, a vision. Beginning a small business is an adventure filled with excitement and uncertainty. Enclosed are three great strategies for your consideration, along with seven bonus strategies for your preparation.
Your Safety Net
To navigate your journey of courage to both start and build your business well, establishing a financial safety net is crucial... just in case for those expensive surprises that seem to always come along to test your mettle at inconvenient times. Your pre-planned financial safety net ensures your business can withstand unexpected problems and continue thriving in its momentum . If you need some coaching around this area, Legacy Planning guides entrepreneurs to talk through their planning process as their business is a part of their legacy; a profitable business can fund your financial foundation that then develops and designs your holistic legacy plans in strengths building upon strengths.
Your Savings Plan
In addition to your business having a financial safety net, in the event clients don't pay but you have employees whom depend on you, you also need to be able to go home at night and have an individual savings plan that covers several months of expenses. This savings plan can and will act as a buffer against unforeseen financial tragedies, such as a fender bender (car accident) or emergency repairs in the myriad of 'how life happens'. Aim to set aside enough to cover at least three to six months of expenses compared to enjoying weekends in Vegas or holidays by the seashore. Start small if necessary and gradually increase your savings as you can contribute to this savings plan for emergencies. Your proactive approach not only secures your lifestyle, to stay intact, but also provides peace of mind.
Your Debt Reduction Plan
Reducing debt is essential for not getting swallowed up by high interest rates, living above your means as a way of life as well as minimizing your business's financial vulnerabilities on paper. They say one's report card in life is one's "income and expense report" or "balance sheet". If debt can be reduced, you will receive a higher score in the adult game of life. Start by focusing on eliminating high-interest debts, which can escalate and destabilize your financial health, such as credit cards even if they are convenient at times when you need them. Explore options such as debt consolidation or renegotiate terms with your creditors to manage your liabilities more effectively. As you lighten your debt burden, you can allocate more resources toward growth initiatives, enhancing your business's financial resilience.
Bonus Strategies:
Accounting Software
Investing in reliable accounting software is essential to avoid costly financial errors. Choose a system that automates most of the financial management processes, allowing you to focus on core business activities. While there are many paid options available, consider using free software that offers basic features such as invoicing and tracking tax deductions. This not only helps in maintaining accurate records but also reduces costs, enhancing your financial health. To be organized in this area pays dividends in the future, especially when working with bookkeepers, CPA's, bankers and other professional who ask questions quickly about your business numbers.
Cost-Control Measures
To enhance financial efficiency, implement strict cost-control measures early on. Regularly review your business expenses to identify areas where you can cut costs without compromising quality or productivity. If you are unsure, ask the smartest business people you know or watch a videos for free on YouTube on this subject. What does this look like? This might look like renegotiating contracts with suppliers, finding higher paying clients, and/or executing quicker in the marketplace compared to sweating the small details. By being mindful of what your customers actually need and want as well as exploring all possibilities in thinking outside the box, you can increase your profit margins and strengthen your financial reserves. Sometimes, it's about controlling costs and other times, it's about thinking higher.
Financial Literacy
Fostering a growth mindset and culture of financial literacy within your team is pivotal, especially so your clients feel confidence in your capabilities. Encourage your employees to understand the financial aspects of business - yours and others, including recent case studies, where the markets are going with the BRICS nations as well as reading some of the banking dictionaries online. Encourage your staff to meet with a banker, a Series 7 broker (or higher in licensing) and develop their own financial plan for their lives. This collective awareness and involvement can invite your associates to feel a sense of personal agency, leading them to share their innovative ideas for your business with 'better to best practices'.
Income Diversification
Diversifying your income sources can significantly reduce dependency on a single revenue stream just in case the world breaks into World War III or there's another pandemic. Explore different market segments or introduce new products or services that complement your existing offerings. This diversification not only spreads risk but also opens up new opportunities for revenue, making your business more resilient in the face of economic fluctuations. This diversification also allows your customers to tell you what they need most now.
Assessment of Risks
Regularly assessing and mitigating risks will include conversations around insurance - to get it, when to get it, and how much of it to get. The right insurance coverage is crucial for your business. Consider the unique risks you face and secure comprehensive insurance policies like property, liability, or business interruption insurance. By obtaining tailored coverage, you safeguard your operations from unexpected financial losses. Ensure you consistently review and update your insurance policies to maintain adequate protection as your business evolves.
Technology for Finances
Embracing technology for financial management and forecasting is an asset in today’s digital age. Financial management tools can offer insights into your cash flow, profitability, and financial trends. These tools can help you make informed decisions, foresee financial challenges, and adjust your decisions by this neutral third party called technology. By leveraging tech tools, you can maintain a clear picture of your financial health and navigate your business towards sustainable growth. Of course, be able to think through these processes as well just in case artificial intelligence is wrong - like Google maps in the car when directions are inaccurate in rural or mountain communities.
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In establishing a financial safety net for your small business, it is essential to take a proactive and disciplined approach, even if it feels new or not within the purview of your strengths. You will be better off to implement these strategies to enhance your financial stability and readiness for unforeseen events. Though some of heed the advice early on, others will have to learn the hard way ... when the money doesn't always come in as usual in the feast and famine of business cycles.
As you are willing to turn this blog into a checklist for your planner, you will see dividends to your planning - even if your parents or siblings forget to tell you, because they might not have known. Adapt and refine these practices to suit your business stage, as they will strengthen the foundation of your business, ensuring its longevity and success in the market. Prioritize these strategies to safeguard your business’s health and future, allowing you to focus more on life balance and the design of your holistic legacy.
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For coaching for HNW entrepreneurs and inheritors, contact Legacy Planning to book your virtual session today!
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