So You Want to Start a Business
By Colette Powers
So many of us want to pursue the American dream of owning our own businesses. It’s the challenge of creating something, controlling your own destiny, potentially unlimited success, following in a parent or family footsteps or, of course, the flexibility that drives us. Whatever your motivation is, there are important planning steps to take before embarking on an entrepreneurial journey.
First and foremost, you need to have your personal finances in order. You need to know how the business can support your own personal finances. If you are not aware of your monthly financial obligations and needs, you can’t determine how your new business will affect them. Your personal life has a profit-and-loss statement and balance sheet, too; you need to know your personal budget and cashflow, just like that of your business.
For business owners, the lines between personal finances and business finances have the potential to blur. Then, it can be difficult to really know of your business is profiting. A CPA who works with business owners can help you establish bookkeeping and accounting practices, and help you understand how to keep them separate.
To get a handle on what your personal financial needs are now and in the future, I suggest creating a personal financial plan. Look into the future and determine what it is you will need and would like to accomplish. This can help you determine what you need to do today to achieve those needs and goals. For instance, if determine how much you will need to save each year to meet your retirement goals, you’ll know how much you need to make from your business or how adjust your personal budget, so you can save.
In creating a plan, first discover your current and future needs, wants and wishes, when you want to accomplish them and how important each is. Laying out your “life-map” helps you create a vision and roadmap to follow, and helps you determine how to stay on track and how your new business can help accomplish this.
Cash is king. It will be in your business and is in your personal life. Creating, understanding and adhering to a personal budget are so important. A budget is not an Excel spreadsheet; it is a lifestyle. Knowing your budget and what you need to do to follow it requires time and discipline, but can be the most advantageous behavior to adopt.
This can also help you determine if and how your business will support your personal lifestyle, and the ideal business profit to do so. It can help you determine the right time to start a business. Perhaps it’s when your personal financial needs are not so great, so there’s not huge demand on the business initially. How much capital will you need to start the business and maintain your personal lifestyle? Can a spouse, partner or family member help you cover your personal needs? If you don’t know your budget, you can’t determine if your business can support it.
Having the right protection in place is also important. Determining your personal life insurance needs to protect yourself and your family is a must. When you start a business, perhaps incurring additional debt, this need may change. Disability insurance is also important when you start a business; should you find you cannot work in your business any longer, you need to make sure you can meet your personal financial obligations. There are business insurance requirements, as well, to consider when creating your business plan.
Creating and understanding your personal plan before you begin your entrepreneurial journey and how the two work together can help ensure success for personal and business goals. SWM
Colette Powers is a Financial Advisor with UBS Financial Services Inc., 440 S. Warren St., Syracuse, NY 13202. Any information presented is general in nature and not intended to provide individually tailored investment, tax or legal advice. Investing involves risks and there is always the potential of losing money when you invest. The information provided may be deemed reliable; however, the accuracy and completeness is not guaranteed by UBS Financial Services Inc. The views expressed herein are those of the author and may not necessarily reflect the views of UBS Financial Services Inc. As a firm providing wealth management services to clients, we offer both investment advisory and brokerage services. These services are separate and distinct, differ in material ways and are governed by different laws and separate contracts. For more information on the distinctions between our brokerage and investment advisory services, please speak with your Financial Advisor or visit our website at ubs.com/workingwithus.