special person to be an entrepreneur

It takes a special kind of person to be an entrepreneur. To be an entrepreneur takes courage, creativity, motivation, and inspiration. It also takes vision.

Most entrepreneurs have an idea of the business they want to build. And they have a vision of the life they want to build for themselves. They can design business strategies with projections for sales growth, assets, and people. And they can envision futures spending time with the people they love and doing the things they love. Entrepreneurs can also anticipate occasions when they will have to dedicate their time and resources to the business and other times when they will be able to focus more on their personal pastimes. This is why entrepreneurs need a financial plan to incorporate the benefits of a successful business venture into the pursuit of their personal and financial goals.

8 Reasons Why Entrepreneurs Need a Financial Plan

entrepreneurHaving a long-term plan helps with short-term decisions

An integrated financial plan gives you a context in which to evaluate short-term business and personal financial decisions. Does a near-term opportunity align with the long-term vision of the business? How will your decision(s) affect progress toward personal goals, both financial and lifestyle, directly and indirectly?

entrepreneur financial planCash flow planning

There is uncertainty in owning your own business, and part of that uncertainty comes from uneven cash flows. In some cases, the business owner anticipates cyclical cash flows. In other cases, the changes in cash flow are unpredictable. A financial plan can help the entrepreneur weather cash flow shortages with appropriate financial tools.

integrated financial plan for entrepreneursTax planning

The decision as to whether a business owner chooses to draw wages, receive distributions from business profits, or a combination of both will have significant financial implications. It will also depend in part on the form of business organization the entrepreneur chooses. Those determinations can affect the types of retirement plans available to the business and business owner and the types of expenses that are allowable to the business. Proper planning can assist with the timing of when income and expenses are recognized and, therefore, the timing and amount of taxes due.

financial plan for entrepreneursRisk management

Entrepreneurs need to be able to tolerate some risk. However, there are some risks that can and should be mitigated. Protecting income for your family and your business in the event that you cannot work due to death or disability is critical. Plans should be in place for succession and disaster recovery. What would happen if your business could not operate due to a natural disaster? How would your personal and business goals be affected?

benefits of financial plan for entrepreneursBenefits

Access to certain benefits, such as health insurance, is often provided by employers. As the business owner, you will be in the position of choosing benefits appropriate for your business, yourself and your family, and your employees. An integrated financial plan will allow you to see the effect of your choice of business benefits on your personal financial situation. These benefits can include not only health insurance but also retirement plans, tuition assistance plans, and other benefits to attract and retain talented employees.

reasons why entrepreneurs need a financial planSuccession planning

If your ultimate exit plan is to sell the business, there are many aspects to consider. Will you sell the business to a current employee, a competitor, or in the open market? If you plan to sell to an employee, will the transition occur over a lengthy period? How will your income be affected? If you plan to sell to an external party, does your payday depend on the business’s ability to continue its growth and profitability? Having an exit plan – whether the plan is to wind down operations or to transition the firm to another owner – is critical.  Otherwise, you may find yourself trapped in your business when you had expected to be retired.

Measuring progress

Having a financial plan allows you to measure your progress in the pursuit of your goals. You will know where you have come from, where you are heading to, and how far you have traveled. You will be able to see the impact of financial decisions on your ability to reach your ultimate destination.  And you’ll be able to evaluate opportunities with an eye on your overall plan.

The big picture

The process of constructing a financial plan requires the organization of your financial resources so that you can understand your true and complete financial picture. It also depends upon clarification of your vision and goals. An integrated plan will not only allow you to see how the success of the business affects your personal goals in the long term, but it can also illustrate how ongoing operational decisions can affect your personal financial situation.

Why Entrepreneurs Work With Infinity Financial Strategies

At Infinity Financial Strategies, we focus on helping entrepreneurs and owners of small businesses use their resources efficiently and make informed decisions. Schedule a free consultation to see how we can help you get clarity and confidence in your financial future.

This article is intended to be educational and thought-provoking rather than financial advice. When we work together in a financial planning engagement, we discuss your unique personal situation and your unique goals. We examine these factors and many others during our financial planning process to determine appropriate financial strategies for YOU.

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