There is often a perception that being a small business owner is glamorous – you get to make big decisions, make big money and live a carefree lifestyle.

The reality is that running a small business is not easy. In Australia, more than 60 per cent of small businesses fail and cease operating within the first 3 years of starting.

So why is this? Well, there are numerous reasons: there could be issues regarding your product, wasting time working on the wrong things or even simply giving up too early. However, most often it is due to a lack of financial planning.

Running your own business is extremely hard work, it can be so consuming that you get caught up in the day-to-day activities and then forget to focus on the future.

It is critical that you take stock, look critically at where the business is at and where you want to be in the future. What sets a successful small business owner apart is their ability to think ahead and plan accordingly. In business, as it is in life, we can’t predict everything. Sound financial planning puts you in the best position for growth and success over the long term. This helps to build a safety net that can continue to catch you even if you have a thriving business.

You went into business to live your passion, make money, and to enjoy the freedoms of a successful business owner. It is important to be very specific and clear about what freedom means to you personally. Then work on those things that truly make an impact and help you achieve your goals faster.

Some important considerations

Many business owners are time-poor and are caught up in the day to day operations of running their business. It is critical to think about long term financial and personal goals and how they are going to be achieved.

Have a plan to identify that you have sufficient cashflow to cover ongoing expenses and ensure that any surplus cashflow is used wisely towards meeting your business and personal goals. Review existing loan structures, leasing arrangements that could save you in the short, medium or long term. Be agile to changing conditions in the economy or personal space.

Unfortunately, all too often we have seen the situation where people have been in business for several years and have little in superannuation. Contributing regularly to superannuation not only provides security for your future it also provides an effective tax strategy as contributions can be taxed at a lower rate when compared with your personal income. Superannuation is not the only investment option available, it makes sense to diversify your investment assets. A well diversified investment portfolio can provide a level of liquidity or a passive income prior to you gaining access to your superannuation funds.

Consideration needs to be given to your personal situation as well as the key people within your business if they are unable to perform their roles as a result of an accident, illness or an untimely death.

Ensure that your business and personal assets are distributed in accordance with your wishes and in a tax effective manner. Ensure that agreements are in place for business owners as the death of a key person or partner could have significant negative impact on the viability of your business.

Take the time to consider the things that are significant to you that you are hoping to achieve that may require money, advice or planning. Seek advice to work through these and help identify what’s getting in your way, slowing you down or stopping you from achieving your aspirations.

We understand the planning needs for small business owners, our approach is to work collaboratively with you to maximise the probability of you achieving your business and lifestyle financial needs and objectives.

Andrew Bolingbroke is a Private Client Adviser.  Andrew enjoys building long-term relationships with clients and working alongside them as their life plans develop and change over time. This gives his clients confidence that, through Boutique Advisers, they have clarity and structure around their finances.  Andrew enjoys working collaboratively with clients’ other trusted advisers to ensure that they have a truly holistic financial journey.