I’m offering people the secrets I’ve learned from transforming my own financial realities. I know that I’m offering people the best thinking that comes from academia, science, economics and optimists. I know what I’m talking about—because I KNOW what I’m talking about—on that deep, lived experience level that makes what’s true for me true for you, too.
These financial tips I’m offering are the ten most important things business owners need to know to take control of their money and build the wealth they really want:
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- Start with the end in mind.Understand the kind of business you are starting, whether it is saleable, and what multiplier to use to estimate its sale price. These numbers are critical to knowing how much to pay yourself and how much you need to save on the personal side in order to achieve economic independence.
- Think of yourself as and behave like the Chief Executive Officer of your own financial future.Your first loyalty is to your own financial and overall well-being. Gambling your own tomorrow on a business opportunity today should not be done lightly. Yes, most of us are all-in, but only taking risks that you can recover from—and learn from—is critical to long-term success. Serial entrepreneurs only take calculated risks and they have contingency plans and room to ramp toward growth.
- Speaking of being the CEO—your company has an executive team, and you might be it!!If you haven’t hired a Chief Financial Officer, a Marketing VP or a Sales VP—you’re it. If you don’t take your executive responsibilities seriously, something will suffer. For most of us, it’s far too easy to hide behind our laptops and continue to be the practitioner of the product or service we sell. This is a surefire path to burnout, and even poverty.
Create checklists, weekly or bi-monthly calendar items, delegate or hire someone or network to find sister business owners who offer the skillsets you need to ensure that all of the critical aspects of your business are being tended to!
- Take control of your finances by tracking, automating and cultivating daily financial awareness.I often share that I log into my online banking every single day (well, except Sunday) and simply look at what has taken place in the accounts since the last day. I have four checking accounts, and it takes only a few moments, but it means the difference between managing my financial life and being at the mercy of it.
I made a decision to be in charge of my life, my business, my money, and so I stay in a constant state of committed action. It’s a huge mindset shift, and being vigilant about bank account transactions combined with automating my finances means I am in control of my financial life.
- Keep your business expenses separate from personal.It sounds simple, and most people know it, but you have to use different accounts and different credit cards and debit cards for business versus personal expenses. It’s critical for accounting and tax preparation.
It’s essential, too, even while you’re bootstrapping, to name a wage you pay yourself for serving your business like you do. You may not be able to take the cash even when you’re making payroll for other folks who work on your team, but it’s essential to track what the business owes you and pay yourself over time.
If you build your business right—with an eye on how your business helps you to earn, grow, maintain and protect your personal wealth, then you’ll have an engine that keeps producing revenue long into your retirement from it. If you don’t, sooner or later, you’ll burn out, feel like you’re doing all the giving and none of the receiving from your business, and give up.
- Know what you can deduct and track receipts.Personally I use an iPhone app called Scanbot which sends images of invoices and receipts straight on over to Evernote. My tax guy will get one single digital file from me come tax time. No shoe boxes.
- Review your books at least once a quarter.Get your accountant to put together standard accounting reports such as Profit & Loss, Balance Sheet, and other reports that are customized to your own business type. Review these reports and track which direction the numbers are headed.
Be sure, too, that when you get those quarterly reports, you also have a sales and marketing planning meeting to address how to get those numbers to be bigger at a larger profit to the business.
- HIRE A TAX PREPARERA good tax preparer will not only prepare your return, but coach and advise you on maximizing your deductions and configuring your life and business to take advantage of other opportunities. Tax benefits abound when you own your own business. Don’t make the mistake of scrimping here—that’s short-sighted. Find someone you trust!
Pro tip: Tax preparers either have the designation Enrolled Agent (EA) or Certified Public Accountant (CPA). All EA’s do tax returns, not all CPA’s do. Find someone who specializes in working with business owners. Also, some tax preparers charge separately for tax prep and tax strategy or consulting. That’s normal, just know the total price you’re going to pay to get both.
- If you have enough revenue, say $1m or more, consider implementing a company retirement plan.Business owners can sometimes deduct up to $250,000 or more on a tax-deferred basis depending on profits, entity type, employee age and tenure. Consult with a financial advisor to see what type of retirement account will maximize your tax benefits. I find tax preparers often recommend the SEP too often, so make sure you ask a retirement plan expert (Ahem. Like me.)
- Be vigilantAs the owner and leader of the business, its your energy and attention that are the catalyst for results. There are seven billion other people on the planet, and you are the only one responsible for your company results at the end of the day. Be vigilant, create and communicate your expectations clearly and often, and manage those numbers!
I’ve created a course that offers an in depth exploration of these ten critical things that business owners need to know. It’s called The Money Blueprint for Business Owners and you can learn more about it here.
In the comments below, please let me know what you’d add to this list of essentials for business owners to earn, grow, protect and manage their personal wealth.