The Entrepreneurs
Guide to Financial
Planning

Did you know that 80% of businesses fail in their first 5 years? Can recession, political turbulence, or even overseas influences be solely blamed? The answer is no, they cannot. Instead, this demise can be attributed to 7 financial risks that business owners neglect to address. What would your business failing mean to you, your loved ones and your team?

Most people establish their own businesses to achieve freedom, pursue a passion or to receive the income they feel they deserve, but how many achieve that success? Why do such a large percentage of business owners shirk away from their finances, when understanding and conquering these risks is fundamental to their future?

As humans we have an instinctive urge to hide from the unknown; however, as business owners, the unknown is thrust upon us every day! As a business owner myself, I know that running your own company brings with it an abundance of complex obstacles that you are expected to understand and conquer; however, you often receive very little support or guidance to enable you to successfully do this, especially with regards to your money, which is such a fundamental part of it.

When it comes to the financial side of your business, hiding from your problems could lead to its demise, you not realising the true worth of your efforts, or you having to work longer and harder than you might. So, what should you be considering?

1. Start with the End in Mind

You need to understand when your business is at its most profitable and when you should walk away from it. Knowing what your financial future looks like, by using Lifetime Cash-Flow Forecasting, can help you to make better decisions today.

2. Get Your Money Working

It’s makes good business sense to keep money in the business, but the interest rates the bank are paying mean that that money is falling in real terms, because inflation is eroding it. Whilst it is sat in the business it can still be invested, so that it is working harder for the future.

3. If plan A fails, remember that you still have 25 letters left

Make sure that you have a back-up plan. Business owners who fail to have this safety net usually fail. Sound Financial Planning can help you devise a solution, for example making sure you have a diversified spread of wealth that could decrease your risk of financial failure.

4. Maximising your assets

Pensions are a very tax efficient way of extracting profits, but there is that constant battle between funding them, and leaving enough money in the business. Why not consider purchasing commercial property for your business to rent with your pension to maximise your assets and minimise tax?

5. Protect Who Is Important

Your business would not be successful if it was not for the people who make it what it is. Looking after your key team members is one thing, but what if something happens to them like long-term sickness of even death? Protection strategies could ensure that if you lost a key person, you can still successfully operate as a business.

6. You Are Not Immortal

Planning for the future is a must to business owners, even when it is thinking forward towards unsavoury subjects like your own death. Unfortunately, you must think about it and make provision for your company and your family. If you do not, your business and loved ones could be left in the lurch.

7. Don’t Over Pay Tax

You must pay some tax as a business owner, but make sure that you and your business are running tax efficiently. Look at ways to extract profits tax efficiently to maximise your hard efforts, and ring- fence your money should the business ever fail.