At Vance Wealth, we believe financial planning should empower you to achieve what matters most. Our thoughtful process is designed to help you stay the course when things are working, and embrace change when it’s needed to forge a path to something greater.
For business owners, this includes a financial plan for your company that’s as comprehensive as your personal plan – and it all starts with four best practices that set up every business for success.
“One of the first things we do for our business owners is look at the foundation of their business planning,” explained John Vance. “Often, our initial goal is to help create some confidence and clarity, and there are four key areas that help us establish this.”
- Build cash reserves.
First, we focus on building cash reserves for at least six months. Over time, we build this up to two years of cash reserves. To establish this vital safety net, we pull from various sources:
- Bank reserves
- A business line of credit
- Personal investments that can be used as collateral, in an emergency
- Manage your accounts receivable.
One of the areas businesses often look past is their accounts receivable, but having too much cash tied up in accounts receivable can really crush a company. Here are a few simple strategies to correct an imbalance:
- Collection periods should be shortened to less than 30 days.
- If needed, implement a retainer, especially in service- based businesses.
- Have an attorney properly draft all your contracts and agreements.
- Establish an emergency plan.
As the business owner, you carry the weight of your company’s operations on your shoulders every day. But what would happen if something happened to you? Creating an emergency plan gives you the confidence that things will be taken care of, according to your wishes, no matter what. Here are a few steps to implement a solid emergency plan:
- Fund a buy/sell agreement: a legally binding document that permits your business to continue operating in the event of the death, disability or retirement of the business owner.
- Make sure everything is properly documented with your attorney.
- Gather all your legal documents in a protected yet accessible place, and have a plan for who will access them in the event of an emergency.
- Develop an exit strategy.
Finally, it’s important to develop an exit plan for your business. This is where your personal financial plan really comes into focus. Ask yourself: How much is enough for me and my family? What are my goals, and how much do I need to get me there? Your exit plan should include:
- Your minimum dollar amount for the sale of your business
- How to continue the legacy of your business with employees and customers
- Other wishes and goals you hope to achieve
- Are ready to take the steps needed within your business? To book a complimentary consultation with one of our Wealth Advisers https://vancewealth.com/book-an-appointment/, We would love to help you achieve more.