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3 Must-Know Finance Tips for Small Business Owners

Tags: business

This is a guest post by Matt Rinkey: Matt is the president and founder of Illumination Wealth Management. His clients most often retain him as their Personal CFO. In this role, Matt helps his clients lead financially intelligent lives by successfully managing the Business that is their family’s financial life.

“Don’t forget until too late that business of life is not business, but living.” – B.C. Forbes

You are a business owner.

Let that sink in for second. Yes, a business owner.

No matter what path you took to start your business—whether it was out of necessity or merely to create something new—the end goal of charting your own path is typically the freedom that comes with it.

In my role as both a business owner and personal CFO to small business owners and their families, I have sat in the coach’s corner and had a front row seat to many unique financial lives. There are the successful business owners, that have freedom (both personal and financial), and then there are the business owners that are handcuffed to their businesses—also personally and financially.

Unfortunately, the latter is far more common than the former.

In my experience, the differences between these business owners are not a product of luck, special talents, or greater intellect. Success and freedom in business can almost always be attributed to the entrepreneur who builds their business based on proven success principles and the one who develops consistent business financial habits that produce results.

So what are these success principles and essential business finance habits you ask? Below are three integral tips to build a business with a solid and successful financial foundation.

1. You Have to Have Personal Goals

You can’t have a successful life by having a successful business alone. Your business plan must fit your personal situation or else it won’t work. You want to do your work, but you don’t want it to run your life.

Successful business owners begin their business goal-setting process by reviewing their personal goals first. But most business owners do the exact opposite. They develop big business goals and then try to figure out how to fit their life around their business.

What happens after that? Well, the hard-charging business owner eventually finds himself in a business that is stress-inducing and unworkable; they find that they are sacrificing too much of what’s actually valuable in their life.

So before your set your next business goal, take a step back and first think about your personal goals and life plan. Start by asking yourself questions like these:

How & where do you want to live?
How much free time do you want? How much time will you spend with your family?
Do you want to save and pay for your children’s college? When do you want to become debt free?
What does life look like after business and how much will your lifestyle cost?

2. Create a Business Budget With YOU In Mind

Now that you know the importance of making your business plan fit within your life plan, it’s imperative that your business budget reflect that.

Yes, I said it, the dreaded B-word—budget. To many, the word “budget” sounds scary, constricting. To the well-advised, a budget provides personal control and proper direction.

A business budget must reflect the overall goals and priorities of the business owner, not simply the business. I have seen far too many entrepreneurs either not use a budget altogether or use a budget that is built on a flawed foundation. The appropriate business budget should be designed to pull you forward, toward your overall life goals and business priorities. A flawed business budget only accounts for the business portion of your life and is not rooted in what you personally value or aspire to.

The business owner in you must recognize that your business is your wealth creation vehicle. The line item for “Owner Salary” in your budget must reflect the amount of money that you and your family need to live the life that you want (remember, the personal priorities you outlined in the last step?). Is $50,000 per year enough to take the vacations you want to take? Do you need to make $1,000,000 to afford your dream house? Price out your ideal life so you know exactly where to aim your business.

Your business budget should also provide for your retirement. I know the thought of it may seem a long way off. Or, you may feel you’ll never even want to retire. Regardless of what you think now, the reality is that, as a small business owner, you’re on your own for retirement. By saving for your financial future, you give yourself much needed flexibility in your life and business.

Your personal goals from the last step need to be quantified so you can accurately set business goals and develop a business budget to support that. A successful business budget doesn’t just reflect the typical business expenses but is designed to align with and lead you toward your life goals.

3. You Must Keep Score

If you are serious about creating the life and business that you want, then it’s imperative for you to keep score and measure your business progress. You can no longer be willy -nilly about your business finances and performance metrics. The successful business owner always keeps score and manages their business finances with integrity.

So, what does financial “integrity” mean for a business owner? It means they don’t commingle their business and personal spending. It means they keep accurate and organized financial records. It means they review their financials regularly and habitually.

For the business owner who means business, it becomes increasingly important to measure and track additional information about your business. This is more than just an understanding of your sales and income. You must identify your business’ “Key Performance Indicators”. KPIs are the key metrics of your unique business, its growth, and its clientele, which can give you the information you need to make better business management decisions.

I highly recommend working with a business coach, bookkeeper, and/or a CPA to track these metrics and determine what really drives your business. Prepare these performance metrics and review them regularly. As the old saying goes: “What gets measured, gets managed.”

And the successful business owner always manages to keep score.

Now, tell us: Which of these tips will you try TODAY to get the greatest financial return on your life? Let us know in the comments below!

The post 3 Must-Know Finance Tips for Small Business Owners appeared first on Merritt Bookkeeping.



This post first appeared on Blog - Merritt Bookkeeping, please read the originial post: here

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