Why Business Owners Need Financial Planning
Financial planning is something that everyone should partake in, regardless of your status and reach, within society. Your assets need to be properly allocated to ensure that your financial health and wellness is locked in for now and the foreseeable future. This is especially true for those who are conducting financial planning as a business owner. While we can acknowledge that business owners/entrepreneurs have a lot on their plate, there is always time to meet up with a certified financial planner in Connecticut. Let’s take a closer look at some common practices for this specific type of financial planning and why it’s important.
Managing Risk & Working Around Financial Issues
Before we discuss the specifics of financial planning for your business, we must define the concept of financial planning, as it’s a very broad umbrella term. Simply put, a financial plan is an evaluation of someone’s current pay and future financial state, by using certain variables to determine future income, asset value, and plans for withdrawal. Your certified financial planner in Connecticut will act as your pillar of strength, wearing many different hats throughout the process to ensure that your wealth is properly managed. It’s a necessary process, as it takes care of people and their families, or business owners and entities in other scenarios.
Business owners go into the workforce with an open mind, understanding that they will incur more risk than the individuals who work under them. Whether it’s from a passing or removal of someone who is the epicenter of the business’ success, personal loss and other disruptions could cause irreparable damage to your business, if you didn’t plan ahead. In order to garner protection from these situations, specialized insurance protection to include the business and coverage for workers will pay dividends in the event of unforeseen circumstances. The financial plan for your business is a financial section of your overall business plan. Evaluate your business goals and clearly define the level of investment you’re willing to make, to achieve these goals and desires.
Benefits Of Financial Planning For Your Business
Now that we’ve laid out how a financial plan can protect the well-being of your organization, let’s examine the benefits of having a plan!
Clearly defines company goals: This is a good jumping off point for a financial plan. How will your organization achieve their goals on a quarterly, yearly, or long term basis? From the get-go, you should establish the need for your business and how it accommodates the needs of others.
Proper cash flow management: A structured plan should also have clear expectations for cash flow. This refers to the amount that’s coming in and out of your company. For start ups, it’s common to spend more than you make, but regardless, you need to determine what’s an acceptable level of expense, and how will you stay on track? Part of this involves measuring the cash flow. Your financial planner will use his or her expertise to monitor the movement of your money.
Budget allocation: There is a close affiliation between budget and cash flow. Once the amount of funding that you need to spend is established, and this can come from sales income or investments, you’ll need to assess the best ways to spend it. Every company has an overall budget or “burn rate”, for each quarter or calendar year. Break this up into specific team budgets, and that any dedicated amounts reflect the importance.
Cost reductions: Apart from determining how much you can afford, a financial plan can also help business owners catch savings ahead of time. As you continue to set out your budget, it’s warranted to refer to previous spending, which makes it easier to identify unwanted or over-inflated costs.
Chance to implement Keyman/key person insurance: This is another example of planning ahead for your future. Key person insurance is a life insurance policy that a company purchases on the life of an owner, a top executive, or another person who is imperative for the success of a business. In this case, the company is the beneficiary of the policy and will incur the premium costs.Ability to use a Buy/Sell agreement amongst partners: A buy and sell agreement is a legally binding contract that determines how a partner’s business share could be reassigned, if the partner passes way or leaves the company. The buy and sell agreement dictates that the available shares be sold to the remaining partners or to the partnership.
Custom Financial Plans With A Certified Financial Planner In Connecticut
If you’re looking to position your business in a comfortable position, our team with Armah Financial Services is ready to assist. Contact us today to learn more about the process!