Why Entrepreneurs Need Financial Planning

Starting a new business is exciting, and those who start businesses share some unique traits. They’re usually comfortable with risk. They’re optimistic about the future. And some either won’t, or would prefer not to, work for someone else. Many entrepreneurs relish the control they enjoy over running their businesses, but some become so focused on organizational growth that they can forget about their own personal finances.

A study by BMO Wealth Management showed that 75 percent of American private business owners had saved less than $100,000 toward their retirement, and that only eight percent had saved more than $500,000. Just 11 percent of business owners between the ages of 45 and 64 said they had more than $500,000 in retirement accounts.  

While many entrepreneurs are also serial optimists, even the most successful business owners shouldn’t leave their retirement to chance. A lot of things can happen to a business between now and your retirement party, and some circumstances may be beyond your control, such as technology changes that could render a business obsolete, natural disasters, regulatory changes, or unexpected major health issues.

As both an entrepreneur and a financial adviser, I’ve struggled with many of the same issues facing other small business owners, so I feel a bit of a kinship with those who have a vision and a drive to start a business and see it succeed. I also know that entrepreneurs could benefit from having a relationship with a trusted financial adviser who can help keep their financial lives organized.

Here are five ways advisers can make a difference for business owners:

  1. Diversifying your investments to provide steady growth, no matter how your business performs. Your business will have ups and downs, but a trusted advisor can help you diversify your investments to minimize volatility when it comes to saving for retirement.
  2. Helping you minimize taxes while saving for retirement. Even if developing a tax strategy is in an entrepreneur’s wheelhouse, it’s a time-consuming effort. A financial advisor with a background in tax planning can focus on tax-efficient investments, tax-loss harvesting and other tax-related strategies to save you money – leaving you with more time to focus on your business.
  3. Working with you to develop a beneficial exit strategy. When it comes time to sell a business, or transition to a future generation, entrepreneurs need guidance from a financial advisor to ensure a deal reflects the entrepreneur’s best interests.
  4. Serving as an accountability coach. You hold your employees accountable for their sales goals, their project deadlines, and their development objectives. A trustworthy adviser will hold you accountable for creating and sticking to your financial goals, improving your chances to achieve them.
  5. An ability to see the forest for the trees. Entrepreneurs face an ongoing rush of decisions. Should I launch a new product? Should I extend my brand? Does this partnership make sense? A financial adviser who understands your business can help you objectively evaluate opportunities and prevent pitfalls that could place your business at a disadvantage.

Smart entrepreneurs often surround themselves with employees or consultants who can assist in the success of their businesses, so why go it alone when it comes to building a sound personal financial future? Think of your financial advisor as your personal board member – someone you can test ideas with and trust to tell you the truth.

At AMDG Financial, we love working with entrepreneurs, seeing their businesses grow, helping them plan for the future, and celebrating with them when they accomplish their goals. Is it time for you to work with a financial advisor? If so, I encourage you to schedule a complimentary, no-obligation appointment. We look forward to serving you!

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