By Matthew Gallagher
Your Finances
Matt Gallagher
The work you do is much more than work. It’s your passion and your livelihood. There’s no doubt that COVID-19 has rattled the US economy and left small business owners to face a particularly difficult choice: adjust to the shifting business landscape to ride out the wave of pandemic-related shutdowns or close their doors forever.
Recent research shows that 34 percent of small business owners don’t have retirement savings plans in place, a fact that’s not entirely surprising. Between figuring out how to keep your doors open, supporting the employees on your payroll and providing a salary for yourself, most of your focus is on the day-to-day needs of your business. But overlooking critical personal financial considerations is risky. Here’s why:
– Unforeseen expenses: Having a robust savings account means you’ll be less likely to dip into your personal accounts to cover costs incurred by your business in the event of an emergency.
– An unexpected transition: Having a retirement plan in place means having control over what happens to your business and finances even if that transition happens before you expected.
– A reliable advisor: During difficult times, things can happen quickly. So it’s important to have an advisor you can trust and rely on to help guide you through the big decisions.
Many small business owners, especially in the beginning, funnel much of their profits back into their business. From propping up payroll and maintaining their workspace to paying back early investors, owners aren’t always able to focus on their personal finances.
But the health of your business’s finances and the health of your personal finances are undeniably linked. That’s where a financial advisor can help.
Providing advice on important cashflow and savings strategies, an experienced financial professional can help you avoid common money management mistakes that could inhibit your business’s growth or jeopardize your personal financial security. They can also help you build a safety net that provides income to you or your employees should your experience an unexpected period of difficulty.
When it comes to retirement, an advisor can help you choose the best option for yourself and create a plan for employees as well. In fact, 94 percent of small business owners report that offering 401(k) plans to employees drives both recruitment and retention.
While you’re driven by a passion to serve your customers, your advisor is motivated to protect your financial interests. That includes advice and execution on the ideal tax and investment strategies to help you optimize your return while minimizing what you owe.
Despite the many benefits of working with a financial advisor, only 40 percent of small business owners have consulted one. That means even fewer are likely to have a team of other important advisors, like a business attorney, bookkeeper, accountant, insurance broker and estate attorney collaborating to ensure the full range of their needs are covered and plans are well-coordinated.
Planning ahead can feel overwhelming, but with a trusted financial advisor in your corner you can rest assured that no matter how tough your decisions might be, you have a professional helping to look out for your best interests.
The COVID-19 pandemic has inspired many small business owners to take control of their futures and prepare for success, no matter what. In fact, 30 percent of small business owners have tapped into their personal savings accounts to save their businesses.
While pulling from your retirement to add capital to your operations can have serious long-term consequences, the decision to shutter your business can be equally as painful. But there will come a time when you make the decision to move on. Whether you’re choosing to retire, sell your business to a new owner or simply close your doors due to circumstance, closing that chapter of your life can be made less difficult if you have a transition plan in place.
A financial advisor can help you figure out how to transition out of your business. Whether it’s selling your business, closing up shop completely or passing it down to the next generation, your advisor can help you determine what makes the most sense financially.
Small business owners know how complicated the relationship between their business and personal lives can be. However, with the help of a financial advisor you can learn how to prioritize your needs, create a plan and protect your legacy, no matter what happens.
Matt Gallagher is a partner and head of business development at TrinityPoint Wealth. He can be reached at 203-693-8519 or mgallagher@trinitypointwealth.com.