FINANCIAL PLANNING ESSENTIAL FOR SMALL BUSINESS OWNERS

By Dan Serra/McClatchy-Tribune News Service
October 12, 2011

Small businesses are the lifeblood of the American economy.

And the people who run them are the heart that pumps out successful stories. But the small-business owner is also at risk.

The number of people who are self-employed is down by 2.1 million since 2006, according to the Bureau of Labor Statistics. The struggling economy makes it harder for individuals to start or grow a business.

But another factor that hampers a small business is the lack of a plan.

Small-business owners can be so busy trying to start or keep their business going that they have little time to plan for the future.

The lower number of self-employed could also be attributed to the lack of planning for handling difficult times.

Here are some essentials for small-business owners to plan to increase their chance of success:

• Funding: Most need to make sure they have saved enough to help them get through slower sales periods.
• Insurance: Some have failed because of not being adequately insured to pay for losses from a disaster. Business insurance and life insurance for the owner are essential to keep a business going.
• Savings: Piling money in the bank or making investments to create future funding is important. Not all the profits need to be spent when business is going well. Owners should also make sure they are saving enough in retirement accounts.
• Succession: About three out of five small business owners do not have a succession plan in place for retirement or death.
• Taxes: How and when money is earned and spent can affect income taxes. Working with a tax planner can help small-business owners put the tax laws on their side.
• Processes: To keep a business running smoothly, especially when the owner is away, having written processes can help anyone perform tasks consistently and on time, creating happier customers.
• Strategic initiatives: Every year, a business owner and any employees should meet to discuss what goals are to be accomplished for the year. Goals that are written down have the best chance of being met.

A small-business owner needs to do more than open the door in the morning, serve customers and close the door at night.

Working with financial experts who specialize in helping small businesses can pay off and prepare a business owner for most economic challenges.