Financial Planning for Small Businesses and Entrepreneurs

Small and mid-size businesses are the backbone of the U.S. economy. Actually, they make up the lion’s share of American business. Entrepreneurship has been moving the American industry and commercial interests for centuries. In fact, in the U.S. small business continues to grow.

The recovering economy in recent years has created many opportunities for entrepreneurs, with the number of small businesses in the US on the rise. In 2021, the number of small businesses in the US reached 32.5 million, making up nearly all (99.9 percent) US businesses.

The increase in the number of small businesses in the US in 2021 is a sign of sustained growth as it marks a 2.5 percent increase from the previous year and a growth of 9.8 percent over the four-year period from 2017 to 2021.
According to the US Small Business Administration, “small businesses” are defined as “firms with fewer than 500 employees.” Of all the small businesses in 2021, around 37 million of them have fewer than 100 employees. 
The US small business administration reports that there are almost 10 million women-owned businesses, boasting $1.4 Trillion in annual income. So this is clearly a healthy and growing sector. 

Jeffrey Basford, Senior Vice President, Investments at David Lerner Associates says, “One thing you can be sure of is that owners of small business will need a solid business plan, as well as a financial plan, and believe it or not, an exit plan.”

Exiting
A successful business builds wealth for its owners by accumulating assets and building future profit potential. The most common favorable exit strategies are to sell the business, sell the assets of the business, merge it with another business or sell shares in the business to the public at large.
Unfortunately, those entrepreneurs who do not plan an exit strategy will, at some point, exit from their businesses unprepared. Some entrepreneurs exit the business for reasons other than wealth, retirement, or the desire to pursue other goals. Death, disability, family circumstances, and divorce from partners sometimes lead to an early exit as well.
Without an exit plan, entrepreneurs who want a favorable outcome for themselves, their heirs, or their employees may find that their exit isn’t what they envisioned.

Personal vs Business Finances
In many cases, business goals can interfere with personal financial goals if expenses on the business end take away from personal financial planning. Striking the right balance between your business and personal goals is a key to achieving them.

Monitor Your Costs 
Reduce your debt, scrutinize your spending habits, and stay on top of your budget. Your income and expenses need to stay balanced to maintain a growing venture. Invest wisely, save your profits, and keep your overheads as low as possible. 

Taxes
Filing and paying taxes can be a long and painful process. Consider using professional bookkeeping software and working with a CPA.

Financing
Every new business idea requires capital to get started – and that means securing financing. Funding can come from a number of sources and sometimes, the owner needs to look for external funding within his or her social circle or even approach a financial institution. The external financing can be in the form of a loan, equity stake, or even advanced payments from customers.

Human Resources
Hiring the wrong people is one of the biggest mistakes made by entrepreneurs. Employees and partners, collaborators, etc., need to fit into the company culture you are trying to build. They need to be hard-working and flexible, as employees in startups often have to function in multiple roles. 

Network
Your contacts are a web of potential prosperity. Keep growing your list of people. Networking can land you a new investor, a great employee, a new customer, or a great mentor.

Service
No matter what else you are known for, be absolutely certain that no one could ever say anything bad about your services. Focus your efforts on providing top-quality service that satisfies the needs of your customers, and then some. Go the extra mile. It will pay off. 

Get your business in order
You need a savvy business advisor for your company, one who has experience with other entrepreneurs and who specializes in startups. An experienced advisor can help you:
– Incorporate
–    Draw up contracts with any co-founders
–    Plan a business succession
–    Set up a retirement plan
–    Put together Retirement and Estate plans
–    Set up insurance plans (life, health, business, property, etc)
– Prepare key agreements for the business
– Set up a stock option plan for employees

IMPORTANT DISCLOSURES
Material contained in this article is provided for information purposes only and is not intended to be used in connection with the evaluation of any investments offered by David Lerner Associates, Inc. This material does not constitute an offer or recommendation to buy or sell securities and should not be considered in connection with the purchase or sale of securities.
To the extent that this material concerns tax matters, it is not intended or written to be used, and cannot be used, by a taxpayer for the purpose of avoiding penalties that may be imposed by law. Each taxpayer should seek independent advice from a tax professional based on his or her individual circumstances.
These materials are provided for general information and educational purposes based upon publicly available information from sources believed to be reliable– we cannot assure the accuracy or completeness of these materials. The information in these materials may change at any time and without notice.
Some of this material has been provided by Broadridge Investor Communications Solutions, Inc.
David Lerner Associates does not provide tax or legal advice. The information presented here is not specific to any individual's personal circumstances. 
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