Do you dream of turning your favorite idea into a business venture? Whether you aspire to be an entrepreneur or currently own a business, it’s important to think about the factors involved and what they may mean to your success.
First and foremost, operating a business is a financial endeavor. Depending on the products or services you plan to offer, you’ll probably need to use your own savings or persuade others to invest in your venture. It takes time for a business to generate income, and making your dream a reality involves both opportunities and risks.
Whether you’re imagining the possibilities or you’re already engaged in a business venture, the more you know and practice strong planning, the greater your chances for success. Consider the following to help you become financially prepared and organizationally fit for business:
- Recognize That It’s Integrated
Business owners find that their financial needs are intertwined and that it is best to have their personal and business financial plans aligned. As someone who also runs a business, a Northwestern Mutual financial representative is well positioned to help you create an integrated plan.
- Develop and Follow a Plan
Every company should have a business plan that summarizes its mission and strategy, the organization and management structure, the products or services to be offered, the marketing and production required, and the anticipated financials. The process of developing a business plan helps you answer the questions related to managing a business and is a valuable tool for use with your management team, advisors, investors and lenders.
- Understand the Legal Requirements
Operating a business involves a range of legal requirements, from choosing the type of entity, to registering and licensing with the proper authorities, to fulfilling financial, industry and government reporting obligations. Each type of business – sole proprietorship, partnership, limited liability company (LLC) or corporation – must follow specific guidelines. Consult an attorney or visit www.sba.gov for more information.
- Attract and Retain Talent
A company’s success depends on the experience, knowledge and skill of its employees. One way to ensure the “talent factor” works in your favor is to offer a benefits package that helps attract, retain and motivate your people. Group benefit plans including group health, group life, group disability and employer-sponsored qualified retirement plans (401(k) for example) provide a base of protection for all employees. Select key employees may look for additional benefits like individual disability insurance, long-term care insurance and non-qualified retirement plans.
- Protect the Business from Loss of Key People
What would happen if you or a key contributor became sick or hurt and couldn’t work? You can protect your business against this loss with key person disability and life insurance that can provide a portion of the assets and income needed to hire and train a replacement and to keep the business growing. Disability overhead expense coverage can provide the benefits you need to meet ongoing overhead expenses such as rent, payroll, utilities, taxes and maintenance costs.
- Manage Liability
Protecting against risk includes securing the physical as well as the human assets of your business. Property and casualty insurance can pay benefits to repair or replace buildings, equipment and data damaged by accident or natural disaster, while liability insurance can provide resources to satisfy personal injury or property claims.
- Prepare for the Unexpected
Protecting the business you’ve built includes creating an emergency plan that anticipates potential problems and trains employees to execute emergency procedures. Other measures include developing safety policies at your facilities, maintaining emergency response equipment, being prepared for power outages, and ensuring access to alternate suppliers.
- Have a Business-continuation Plan
You’ll have the best options if you prepare an exit strategy in advance. Developing a business-continuation plan helps keep a business flourishing from one owner to the next by outlining clearly defined goals; establishing a fair market value for the business; and creating a properly funded buy-sell agreement to assure owners, employees and creditors of business continuity.
Owning a business offers opportunities and rewards, as well as risks and challenges. Having a well-conceived plan and understanding the legal, financial and operational requirements are keys to success.
A Northwestern Mutual financial representative can work with you – and connect you with specialists in business and estate planning – to create an integrated financial plan that meets the specific needs and goals of your business and your family.