How to Approach Wealth Management for Business Owners

Wealth management generally includes comprehensive investment management alongside financial advice, tax guidance, estate planning, and even legal assistance. It is vital for business owners because it helps them maximize the rewards of their efforts and success.

Managing and building wealth is important because business owners do not usually have the same luxury of employee pension plans and employer match programs. Still, they do have unlimited income potential to work with.

Wealth management and retirement for business owners can involve many complex decisions, strategic planning, and focus, so it’s essential to work with trusted advisors to guide you in these critical areas. Still, there are many things you can do to approach wealth management on your own too.

This post will review tips for approaching wealth management as a business owner.

Tips for Approaching Wealth Management as a Business Owner

Keep in mind, these are general tips, but wealth management can be done in various ways. Overall, being proactive is key to wealth management.

Maintain a Healthy Cash Flow

Cash flow issues can mean the difference between a successful business and a failure. In fact, 82% of businesses fail because of cash flow problems, so maintaining a healthy cash flow is a priority.

A positive cash flow provides security that you’ll be able to cover emergencies and unexpected events and allows you to take advantage of opportunities when they arise.

Some strategies to improve your cash flow include:

  • Offer discounts for early payments
  • Implement penalties for late payments
  • Cut unnecessary spending and stick to a budget
  • Maintain a cash flow forecast and watch for any patterns
  • Keep your records up to date, so numbers are always accurate
  • Send out invoices as soon as possible
  • Keep business and personal finances separate 

Keep Tabs on Your Finances

In addition to maintaining a healthy cash flow, it is essential for business owners to keep a close eye on their finances. Keeping tabs on your finances will be fundamental in building wealth because, as they say, “What gets measured gets improved.”

Tracking your finances will allow you to make more informed decisions and avoid potential pitfalls. If a problem arises, you can make quick adjustments. If you need funding, you’ll know before it’s too late. If an area of your business is performing well, you’ll notice and maybe be able to use that info to improve other areas. 

Keep your accounting software updated to stay organized, monitor your finances, and produce quarterly, if not monthly, financial statements looking at key KPIs.

To keep tabs on your finances, you should also regularly: 

  • prepare budgets and future projections
  • plan for tax season & pay your taxes
  • monitor your expenses and where you can cut costs 
  • look for new ways to generate additional revenue

Stick to Your Retirement Plan

You may not have even thought about retirement and are not alone. 51% of small business owners don’t have retirement plans.

Building wealth to retire is essential if you want to live the life you have now after you move on from your business, especially since, unlike many employees, you do not have a company pension or employer-matching program to help. 

Most business owners intend to sell or transfer their business to retire. And it’s also important to figure out when you would like to retire and what future you want for your business.

Your advisor, accountant, and lawyer can help you answer these questions and help with estate planning, tax-efficient investments, and retirement savings plans.

Once you have a retirement plan, you must stick to it and revisit it repeatedly to ensure your goals are still aligned.

Focus on Your Exit Strategy

Over the next decade, nearly three-quarters of small business owners intend to exit their businesses.

Every business owner will need to transition their business in some capacity, so creating a succession plan (or exit strategy) is essential.

Common exit strategies involve selling the business to third parties or passing the business to another family member, whether through a sale or transfer.

Most business owners state finding a suitable successor or buyer is the main hurdle to succession, which is why it’s important to start planning your succession early with several exit strategies to prepare.

Even if you find someone, it will take time to prepare and train them to learn every part of the business to be successful. Preparing your business to run without you is crucial, including systems and people.

Every business is unique, so it is important to find the right people to provide guidance and help you through this transition.

Partner with an Experienced Wealth Management Advisor

One of the best decisions you can make to help you with your wealth-building plan and management of your business is to partner with an experienced tax and wealth advisor. 

At Shetland Financial, we can help you more than just track your finances but also build long-term wealth and help guide your business decisions for a successful future.

Contact us today to learn more about how we can help!