If you are an entrepreneur or a small business owner, you are accustomed to making many decisions every day. And whether you have built your enterpri
If you are an entrepreneur or a small business owner, you are accustomed to making many decisions every day. And whether you have built your enterprise from the ground up, or you have inherited a family business, you feel a sense of pride in leading it and a duty to ensure its sound future.
This sense of responsibility is necessary. Someone has to commit to making sure it meets with success. Yet, this same sense of duty and personal responsibility can be the business owner’s Achilles heel. You wind up making many important decisions by yourself, rather than consulting with the professionals who can best help you. This decision can be the undoing of your business or, at the very least, compromise the potential it has.
When Franklin D. Roosevelt assumed the U.S. presidency, he inherited a nation on its knees. His response to the challenges facing the nation may have done more to change American society and politics than any other president except for Abraham Lincoln. How did he do it? He knew the value of trusted advisers.
He identified and gathered leaders from various industries and crucial areas of responsibility to put their heads together to find the best solutions. This “brain trust,” as New York Times reporter James Kieran called it at the time, was responsible for helping Roosevelt decode problems and design new solutions for America that aided the country’s recovery.
How is this relevant to you as a business owner? Learning how to ensure your company’s health and future could fill several books. However, for our purposes, the following are some areas where a financial team is key.
How to save and where
There is an old saying that goes something like this: “There are two ways to enjoy more money – increasing your revenue and decreasing your costs.” Small business owners can get on a mental rat wheel when it comes to generating income. Need more money? “Make more, make more,” says the internal chatter. “Run faster, run faster!”
However, you may be losing money by saving it. Here, I am talking about surplus cash. As an executive coach who works with business owners and other executives, I have come across some who have saved up surplus cash but have not put it to work for them.
Most recently, I learned in conversation that one had kept $1 million in a regular savings account, drawing minimal interest for more than 5 years. That same amount, wisely invested while being readily accessible in case of emergency, could have yielded enough interest to hire the employee he needed to expand the business.
With this same mindset, he treated his personal assets in the same way, holding $250,000 of the family’s accumulated income in the same manner over the same period and drawing 0.05% interest and had amassed $625.63 in interest. Had he worked with a wealth adviser, conservative options maximizing his return on investment would have been 5%, yielding a total of $69,070 in interest.
If you are one of those whose good intent is to have a cash reserve, but you haven’t spoken with a wealth adviser about how to keep this safe and make it work for you, you are losing money while you gaze at the large figure in your business savings.
Who does your taxes?
Is this person a tax strategist, or do they simply file for you when the time comes to do so? Another hidden cost to your financial health is not approaching your taxes in a strategic manner. You can wind up owing a lot, or actually overpaying taxes.
Tax reductions can be significant to your financial health, and as the parameters around these can change from year to year, it would be foolish not to make sure you have a certified public accountant on your team. Meet at least twice yearly with yours, or more upon their recommendation, in order to make sure they understand the shifts and changes your business is undergoing that might affect your taxation.
How are you handling family assets?
I’ve encountered many business owners who have taken great precautions to protect their business in many ways but have forgotten to do the same for their personal assets. Many have been careful to keep things in the family but have placed family assets at great risk by utilizing the collateral for business interests.
In fact, one business owner I knew lost his house because of this. He had worked so hard for his family, only to lose all. If you don’t have an estate planning attorney on your financial team to sift through the intricacies of inheritance and business interests, you can be jeopardizing everything you own.
Making critical decisions such as those affecting your financial health and other areas of business and life should not be done in a vacuum. No one really does it alone. Those who lead well make certain they tap into the professional resources that will help them meet their goals and objectives.
Patti Cotton works with executives, business owners, and their companies, to elevate and support leadership at all levels. Reach her via email at Patti@PattiCotton.com.