Running a small business is no easy task. The day-to-day requires tremendous commitment, with every waking hour seeming to be consumed with its management and ensuring its sustainability. When you’re so busy with the details, it can be difficult to keep an eye on the big picture of your business’s financial health, yet this is a critical aspect of entrepreneurship. In this article, we’ll share five steps you can use to assess key elements of small business financial health, allowing you to course-correct as needed to keep your business sustainable and primed for growth opportunities.
Small Business Financial Health Assessment Step 1: Be Sure Your Legal Structure is Relevant
It’s not unusual for a new business owner to choose to operate as a sole proprietorship or a simple partnership. However, as your business grows and evolves, you may need a more formal structure that can help both protect your assets from creditors and aid you in accessing financing. Considerations for legal restructuring can include an LLC, a corporation, or certain partnerships.
Small Business Financial Health Assessment Step 2. Keep Your Employees Happy
Employee retention can be a challenge for small business owners. Competition is inherent in business, and happy employees who are committed to your business are essential to remaining competitive. Ensuring that your employees have what they need to feel fulfilled and valued can help you retain them as a part of your team. Providing benefits can go a long way to achieve this. A good health plan is a great first step in showing your commitment to your team over the long term.
If you have specific employees who are key to your success, it could be valuable to offer them special benefits such as a deferred compensation plan or a bonus structure. Showing your employees that you value them can go a long way toward keeping morale high, and happy employees tend to be more productive, too.
Small Business Financial Health Assessment Step 3. Ensure Your Insurance Coverage is Adequate
Your business needs will evolve over time and ensuring that your insurance keeps up with those needs is critical. Regularly reviewing your insurance is a must, as failing to maintain the proper insurance can be disastrous for your business. A financial advisor can be very beneficial in helping you identify any gaps in your coverage to make sure that you and your business remain protected.
Small Business Financial Health Assessment Step 4. Plan for Succession
Yes, all things must come to an end. Whether through choice or necessity, you will leave your business at some point and the planning you do now will determine how effective and successful that transition is for your employees. Creating a succession plan is critical for many reasons, including creating a tax-efficient, smooth transition for yourself and your business.
Small Business Financial Health Assessment Step 5. Partner with a Financial Advisor
Small business owners often believe that it’s their responsibility to do it all. It’s common for entrepreneurs to have a “go-it-alone” mentality that, while often leading to your initial success, can also lead to burn-out. Remember that you’re only human and juggling the demands of your small business, along with the needs in your personal life, can be overwhelming. You can help yourself by shedding some of that go-it-alone perspective and partnering with a professional financial advisor. They can help you balance the financial needs of your business with your personal goals, and help you gain more control over the wealth you’ve worked so hard to earn.
If you don’t yet have a financial advisor in your corner, we can help. At Principal Preservation Services, we work with individuals and businesses to provide a personalized roadmap to a more secure financial future. Contact us now to learn more about our services and determine whether partnering with us on small business financial health and more may be the next best step for you. We look forward to hearing from you!
