Entrepreneurship can be an exciting and rewarding journey, but it can also come with a unique set of financial challenges. Unlike employees in traditional 9-to-5 jobs, entrepreneurs often have to juggle many hats — including managing not only their business but also their personal finances.
This multi-hat reality can quickly snowball into overwhelming and untenable scenarios, and can be especially hard to navigate when your business is growing and your financial landscape gets increasingly cluttered. Although you didn’t sign up to be in the circus, it could start to feel like it…
And that’s why we’ve written this article on wealth management for entrepreneurs: we want to help you declutter, get out of the unending stream of details, and stop wearing so many hats. You’re no clown; you’re an inspiring and confident entrepreneur! We want to help you live into that identity.
Throughout the rest of this blog post, we’ll explore four key problem areas many small business owners like you face: cash flow and budgeting, access to financing, time management and delegation, and risk management.
Alongside those high level overviews, we’ll discuss strategies to help manage these challenges effectively, including why we believe it is important to work with a certified financial planner (CFP®) to help you make sound financial decisions that support both your personal and business goals.
If you’ve recently left a 9-to-5 job to pursue entrepreneurship full-time, this guide also highlights key financial planning considerations for transitioning smoothly into this new chapter of your life.
Before We Start: Basic Assumptions about Wealth Management for Entrepreneurs
It should go without saying that this guide was written for people who have a small-to-medium business up and running already. Of course, you might be relatively new to it, but hopefully you have your basic business idea in place: the particular product or service that you know (based on market research) will serve people and meet a need.
Our second basic assumption is that, just as your business exists to serve specific needs, there are a few things you can potentially outsource to others to help meet your needs as an entrepreneur. The world we live can be a beautiful eco-system where everyone has a role to play in helping everyone else. That is the spirit within which we have made most of our recommendations.
Finally, because we really do believe that you can’t wear every hat (at least not sustainably, in the long-term), we won’t pretend to do the same, and that is why we have limited this guide to our area of expertise: wealth management.
You are likely to face many challenges beyond those mentioned here, including marketing, supply chain issues, mental health challenges, etc., but we want to offer solutions where we know we can add value, and leave the rest to other, more knowledgeable sources.
Now, with those assumptions in place, let’s move on to a big dilemma many are likely to face in this discussion on wealth management for entrepreneurs: cash flow & budgeting…
Budgeting & Cash Flow for Entrepeneurs
Cash flow is the beating heart of any business, but it can be particularly critical for entrepreneurs. Without consistent and reliable cash flow, it can be nearly impossible to grow your business, cover your operational expenses, or pay yourself a reasonable salary.
Many entrepreneurs face cash flow problems, but they can be especially prevalent in the early stages, when startup expenses are high and you are still developing consistent revenue streams.
The Importance of Budgeting
At this point, a solid budget can be a good foundation for effective cash flow management. Budgeting allows you to project your income and expenses over a set period, and can provide you with a clear picture of how much money you need for monthly operating costs, taxes, and savings.
Without a budget, it could be easy to overspend on non-essential expenses that can deplete your resources and jeopardize the long-term sustainability of your business. In other words, budgets help guard against ‘mission creep’ (veering off from your primary business purpose) and help you to be more intentional with your time and business finances.
With that in mind, here are some steps to help you create a solid budget to support both your business and personal finances:
- Track Income & Expenses: Start by tracking each source of income and each expense—both business and personal. This meticulous process will help you identify where your money is going and which areas you might need to cut back on. To do this, you could pay for comprehensive software solutions like Xero or QuickBooks (and record that purchase as a business expense) or you could rely on something as simple (and free) as Google Sheets, Numbers or an Excel spreadsheet.
- Separate Business & Personal Finances: Once you’ve got your main spreadsheet or database set up, it’s time to separate your business and personal finances. The most obvious way to do that would be to apply for a dedicated business acount and business credit card, and pay yourself a salary through the business. That approach can not only help with clearer budgeting, but it can also help you protect your personal assets and help simplify your taxes come the IRS filing deadline.
- Plan for Taxes: Speaking of taxes, one of the biggest financial mistakes entrepreneurs make is not setting aside enough money for them. Depending on the legal structure of your business, you may be responsible for everything from self-employment tax, to income taxes, to payroll taxes, and other categories besides. It might be wise to work with a tax professional or qualified financial planner like Iron Point Financial to estimate your tax liability and optimize your business accordingly (through trusts, deductions and credits, tax-advantaged accounts, etc.).*
- Prepare for Dip Periods: Many businesses experience seasonal or fluctuating revenue, which means it’s important to have an emergency fund or cash reserve in place to cover expenses during slow months or unexpected downturns.
*For a comprehensive review of your personal situation, always consult with a tax or legal advisor. Neither Cetera Advisor Networks LLC nor any of its representatives may give legal or tax advice.
Managing Cash Flow in Real Time
Once you’ve created a budget, it’s important to take an active approach to managing cash flow, with the aim of ensuring there is enough working capital to keep your business running. Some cash flow management strategies that can help include:
- Invoicing and Payment Terms: If your business relies on client payments, then it would make sense to be proactive about invoicing and setting clear payment terms. You could supplement this clarity by offering discounts for early payments and implementing interest penalties on late payments (though be sure to be upfront about this from the outset, to avoid unnecessarily angering your buyers).
- Control Spending: It sounds obvious, but it bears repeating that avoiding unnecessary spending, particularly during the early stages of your business, is a must. The key here is to estimate the ROI of each and every expense before making a purchase, whether that means new equipment, marketing, or hiring.
- Financing Options: If you notice your business experiencing periodic cash flow gaps, you might want to secure a line of credit or apply for short-term financing to cover expenses during slower months (more on this in the next section).
With all of these potential moving parts, cash flow and budgeting could feel like a juggling act, but with a disciplined approach and a clear plan, you can build a strong financial foundation for your business that doesn’t feel quite so chaotic.
Access to Financing for Entrepreneurs
Many entrepreneurs soon discover that growing a business requires more capital than they initially expected. Whether you need to finance a new product launch, expand your operations, or hire additional staff, having access to the right financing ahead of time could be crucial to achieving your business goals.
Types of Financing Options for Entrepreneurs
There are several financing options available to entrepreneurs, each coming with its own pros and cons. As you read through these, remember that it’s important to choose a type of financing that suits your needs and matches your business’ development stage; there is no one-size-fits-all solution here.
- Business Loans: Traditional bank loans offer competitive interest rates and predictable payment terms. However, they typically require strong financial statements, a good credit score and, occasionally, collateral. Still, if your business is well-established, this could be a good option for you.
- Lines of Credit: A business line of credit offers flexible access to funds as needed, making it ideal for managing cash flow fluctuations or financing short-term expenses. Typically, with this arrangement, you are only charged interest on the amount you borrow.
- Angel Investors and Venture Capital: For high-growth startups, angel investors or venture capital firms can provide significant funding in exchange for equity in your business. You are more likely to see this type of financing in the tech and healthcare industries, but those of you familiar with the hit show Shark Tank have probably seen examples of this kind of financing arrangement for other industries too.
- SBA Loans: The U.S. Small Business Administration (SBA) offers loans with favorable terms for small businesses. These loans are often easier to qualify for than traditional bank loans, but on the flip-side, the application process can be pretty time-consuming.
- Crowdfunding: If your business has a loyal, existing community or customer base, crowdfunding platforms such as Kickstarter or Indiegogo can help you raise funds for specific projects or initiatives (usually in exchange for special perks for those who contribute).
Preparing for Financing
Before applying for financing, it’s important to prepare your financials and beautify your business plan so that you are able to present a compelling case to lenders or investors. In practice, that means checking off the following:
- Create a Detailed Business Plan: Lenders and investors want to see a clear strategy for how you will use the funds and how you plan to grow your business. Your business plan should include financial projections, market analysis, and an outline of your growth strategy. In other words, they want to know that you are competent and that they can trust you with their money.
- Get Your Finances in Order: Make sure your bookkeeping and financial statements are up to date. Lenders will want to see your profit and loss statement, balance sheet, and cash flow statement to assess your ability to repay the loan.
- Improve Your Credit Score: A good personal and business credit score can improve your chances of securing financing and getting better interest rates. The better your credit record, the more favorably lenders will view your application.
- Practice Your Pitch: Although we’re talking about real life, and not a TV show, it helps to make sure you’re confident presenting your business plan to potential investors. While there are no guarantees, it certainly won’t hurt to exude assurance and know-how throughout your application, especially if it involves any in-person meetings.
Hopefully, as an entrepreneur, the idea of getting creative with your business plan won’t be too alien to you, and hopefully, you can have some fun with it! The more you bring yourself to the equation, the more you can make a lasting impression.
Access to capital is one of the biggest hurdles for entrepreneurs, but with careful planning, a strong business case, and a winning personality, you could secure the funding you need to take your business to the next level.
Entrepreneurial Time Management & Delegation
Although entrepreneurs are often forced to wear many hats, with many opaque acronyms to boot — CEO, CFO, CMO, CHRO, to name just a few — it’s worth acknowledging that trying to do everything yourself, forever, is a long-term recipe for burnout, missed opportunities and poor decision-making…
…and that’s where the dual lifesavers of effective time management and delegation come in. We cannot stress enough how much of a difference-maker these two practices can be to your success as a business owner.
Delegation in Wealth Management for Entrepreneurs
As a business owner, time is one of your most valuable resources. By delegating non-essential tasks to others, you can focus on the strategic aspects of running your business. This is particularly important when it comes to thinking about wealth management for entrepreneurs, where any mistakes you make can have both costly and time-consuming consequences.
Perhaps the most obvious way to delegate this function is to work with a certified financial planner (CFP®) like Iron Point Financial to manage your personal and business finances. A CFP® like us can help you with cash flow management, tax planning, retirement savings, investment strategies, and more, allowing you to focus on growing your business.
Moroever, if you were to join as an Iron Point client, you could rest easy knowing that we will tailor our service to meet your unique goals as a business owner. At our firm, we always make sure to sit down with clients like you to hear your dreams, and then we tie our performance metrics to what we have heard you say, not a market index. We do this because we want to be just as invested in seeing your dreams come to life as you are.
As Greg Liszka (CFP®, RICP®), Founder and Advisor at Iron Point says often,
“We’re going to customize our work to your goals, and then we’re going to monitor it. Depending on the strategy, that might be weekly or monthly — but we are going to monitor it and make changes as conditions dictate. You’re hiring us to actively do a job, not to sell you something. We are here to fix a problem.”
In that sense, you could think about working with a CFP® like you would think about hiring an employee to fill a position: we’re here to help optimize the wealth management function for your business.
Time Management Strategies for Entrepreneurs
Beyond delegation, there are several time management techniques that could help you stay productive and focused:
- Task Prioritization: You could consider using time management tools like the Eisenhower Matrix to prioritize tasks based on urgency and importance. The idea here would be to focus on creative, high-impact tasks that drive business growth, and then delegate or automate the rest.
- Time Blocking: It could help your overall entrepreneurial workflow to schedule specific, separate blocks of time for deep work, meetings, and administrative tasks. This ensures that you are intentional about allocating time for important tasks without getting stuck in smaller, time-sucking distractions.
- Technology: Even if you can’t afford to hire an assistant or accountant just yet, you can still leverage affordable technology to streamline repetitive tasks, such as accounting software for bookkeeping, project management tools like Asana for team collaboration, and customer relationship management (CRM) systems for sales tracking; in other words, a kind of ‘digital delegation’.
Time management is all about working smarter, not harder. By delegating or automating the more ‘mundane’ tasks and focusing on your entrepreneurial strengths, you could free up more time to expand your business, and turn your gaze to the projects you find most engaging.
Risk Management for Entrepreneurs
Risk management might sound boring, and certain aspects of risk management might never become a primary concern for your business, but it’s practically non-negotiable to have the basics sorted (especially if there are unique regulatory concerns in your industry).
Running any business can expose you to risks of all kinds, from lawsuits and market fluctuations to employee turnover and supply chain disruptions. That’s why it’s crucial to have a risk management plan in place from the beginning to protect your business assets and to help safeguard long-term sustainability.
Types of Risks Entrepreneurs Face
Entrepreneurs face a wide range of risks, including:
- Liability Risk: If your business is sued, you could be held personally liable for damages, especially where your personal and business finances aren’t properly separated. Taking the time to incorporate your business as an LLC or corporation can provide critical legal protection for your personal assets.
- Market Risk: Economic downturns, changing market conditions, and new competitors can all impact your business’s profitability. Diversifying your revenue streams (innovating) and building a financial cushion over time can help to mitigate this type of risk.
- Operational Risk: Supply chain disruptions, equipment failures, and employee turnover can all affect your ability to deliver the products or services you’re famous for. Having contingency plans and the right insurance coverage can help you manage these risks if ever they rear their ugly heads.
- Financial Risk: Poor financial planning or cash flow management, even on a small scale, can ultimately lead to insolvency or bankruptcy. Delegating part of this function to a trustworthy financial planner could help you mitigate this kind of risk.
Risk Management Strategies
Beyond the examples given in the previous subsection, here are a few more risk management strategies you could use to protect both your business and personal assets:
- Insurance: It goes without saying, but you need to make sure your business has adequate insurance coverage, including basics like general liability, professional liability, property, and business interruption insurance. For your own, personal protection, you might also want to look into term life insurance and disability insurance.
- Asset Protection: As per our comment about incorporating your business properly, separating your personal and business finances will help to shield your personal assets from business-related liabilities. For an even more advanced layer of protection, you could also think about setting up a trust or other asset protection vehicle.
- Emergency Funds: We’ve said it several times now, but it’s worth repeating: developing an emergency fund is a great practice both for your business and personal expenses. Emergency funds can be a great financial buffer in the face of unexpected challenges like a downturn in revenue or a large, unforeseen business expense.
If any of these risk management strategies seem like they would require more specialization or expertise than you currently possess, then, as we highlighted in the previous section of this article, you could always lean on a CFP® for trustworthy advice and implementation around any of the strategies discussed here.
The Iron Point Difference
Closing Thoughts: Get Equipped for Your Financial Future Today
As we said from the outset, entrepreneurship can be an immensely rewarding but also hugely challenging path — one that requires careful attention and intentionality when it comes to navigating both your business and personal finances.
By highlighting cash flow and budgeting, access to financing, healthy time management through delegation, and effective risk management in particular, we have done our best to equip you for the long-haul, so that you will not be thrown off course by any turbulence to come.
The last thought we will leave you with today is that, for many entrepreneurs — particularly those who have left 9-to-5 jobs to run their business full-time — working with a certified financial planner (CFP®) can provide the added support and expertise needed to confidently manage your wealth and financial goals.
A CFP® can help you create a comprehensive financial plan that allows you to focus on what you do best: growing your business. If that’s an area you would like help with, why not reach out and schedule an appointment with us today, to start a conversation about your wealth management needs?
And if you enjoyed this article on wealth management for entrepreneurs, why not sign up for regular email updates from our blog, so that you don’t miss future posts?
Iron Point Financial is here to empower you to secure a brighter tomorrow. We operate physical offices in Grove City, PA and Greenville, PA.
We primarily serve residents of Pennsylvania, Ohio, West Virginia and Florida but we also have registered broker licenses for 22 other states across the continental USA.
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