There’s no such thing as “balance” when you’re a small business owner. Every waking hour, as well as many sleepless ones, are consumed with managing and sustaining your business. It can be easy to get so focused on running your business day-to-day that you forget to spend time monitoring the overall health of the business.
Because we know you’re busy, we’ve put together an easy five-step, small business financial checklist that can help you get a sense of how well your business is positioned.
Small Business Financial Wellness Checklist
1. You have the right legal structure
When you launched your business, you may have operated as a sole proprietorship or simple partnership. “As your business grows and your needs change, there are good reasons to review that decision,” says Matt Johnston, Senior Director of Sophisticated Planning Strategies at Northwestern Mutual. “A more formal business structure, such as a corporation, LLC, or certain partnerships, can help you protect your personal assets from creditors. Adopting a formal structure can also make your business more attractive to potential lenders and co-owners should you need financing or outside investment to grow. It can also position you to take advantage of other business opportunities that may come your way.”
2. You’re a competitive employer
When you’re in business, you know all about competition. In today’s tight labor market, some of your toughest competition may be holding on to your best employees. “Offering the right mix of benefits—such as health, group life and disability insurance, a retirement plan, and long-term care benefits lets your employees know that you value their contributions, encouraging them to remain engaged in building your business,” says Johnston. “And if your continued business success is dependent on certain key employees, you may want to consider implementing additional benefits specifically for them, including a bonus life insurance plan or deferred compensation plan.”
3. You regularly review your insurance
“One of the biggest mistakes business owners make is not regularly reviewing their business insurance to ensure it meets their changing business needs,” says Johnston. “A financial advisor can help you review your current policies, identify any gaps in coverage and ensure your policies continue to protect you, your business and the employees that are essential to your business success.”
4. You have a plan for the end
With any business, a time will come when you want or need to move on. How that plays out will depend on how much, or how little, planning you do now, says Johnston. “A well-thought-out succession plan and properly funded buy-sell agreement can help ensure the smooth and tax-efficient transfer of your business,” Johnson says. “This includes providing ready cash to purchase your shares of the business at retirement or in the event you or a key employee makes an unplanned exit from running the business.”
5. You have a financial advisor
“Business owners often find themselves juggling the demands of their business with the needs and wants of their loved ones,” says Johnston. “A financial advisor with expertise in both business and personal planning can help you balance both professional and personal goals, giving you more control over how you accumulate, enjoy and distribute the wealth you worked hard to build.”
Northwestern Mutual representatives do not provide legal advice. Please discuss your individual situation with an attorney or legal professional.