Financial Planning for the Modern-Day Entrepreneur

The word entrepreneur has taken on a whole new meaning in this day and age. It's not just about dreaming up an idea, starting a business, and operating it for 5-10 years. The entrepreneurial journey now includes employees, investors, partners, vendors, customers. Simply put: entrepreneurs are the CEOs of their businesses. As such, they need to have strong financial planning skills to ensure their business is successful today and tomorrow. Here, financial planning specialist Genai Walker Macklin are some tips for financial planning as a modern-day entrepreneur.

Define your goals

Setting up a financial plan begins with defining your goals. These may be short-term or long-term, and they will likely change as your business grows.

According to Genai Walker Macklin, it's important to have a clear understanding of what you want to accomplish and how you want to go about achieving it before starting any planning process. The first step in financial planning is figuring out what your company is worth. This gives you an idea of the potential for growth and profitability that you could potentially achieve through the use of proper investments.

Once you've set a value for your company, it's time to define your primary financial plans by deciding what types of assets will work best for the conditions of your company and where these assets should be located geographically or within different sectors.

Build a budget

No one wants to think about finances when they're in the middle of a business venture. But as CEO, it's your responsibility to do so.

You need to be thinking about what your company can and cannot afford. It's the only way you'll make sure that your company sets itself up for success. It's also an excellent opportunity for you to educate yourself on different business aspects, including how much money is needed to maintain operations, marketing budgets, and other key areas of concern.

When developing a budget for your company, start by identifying three main revenue streams: product sales, services sales, and sponsorships. Identify revenues from each of these sources over a six-month period and divide into the year by six months. Add up all the total revenue numbers generated during this time period and then multiply them by 12 to see what the revenue amounts would be over a year. Divide those totals by 365 to see how many days of revenue you would have from each source over a year.

This process will help you understand how much money it will take in order to sustain operations over an entire year with regard to the three main revenue streams identified above, explains Genai Walker Macklin, Investment Advisor at Morgan Stanley.

Consider tax implications of your actions

When you're an entrepreneur, you have to consider the tax implications of your actions. You need to plan out how much is going to be taxed, whether it's the company itself or your personal income (or both). The key is not just considering taxes on the federal level, but also taking into account state and local taxes as well.

Aside: You can always check out this overview of federal taxation in the US.

Let's say that you're a part-time consultant who works for 5 hours a day and earns $2,000. You've calculated that if you work full-time and earn $4,000 per week, you'll be taxed at 40 percent on those earnings. So this means that if your company doesn't pay any taxes at all, then you'll end up paying 20 percent more in taxes than if your company did.

This might seem like a small difference - but when you take into account the total amount of money earned from each job - that additional 20 percent could make a big impact on what's left over for investment opportunities or other things such as salaries for employees.

Make smart investments

Being an entrepreneur is a 24/7 job and entrepreneurs need to think strategically when it comes to their financial planning. Sometimes, they have to make difficult decisions about what investments are in the best interest of the business. However, it's important for entrepreneurs to always maintain long-term goals and also consider what will work for their company now.

For example, there are some investments that may seem like a good idea at first, but might not be in your company's best interest in the long run. You want your business to be able to grow over time without making any difficult or expensive investments that could potentially hurt your success.

So take into account your long-term goals and assess how these investments would benefit them instead of focusing on the short-term benefits. If you're considering investing in a startup, assess whether or not it's going to help grow your business as opposed to just making cash flow more regular.

Know the difference between making money and saving money

In order to make it in the ever-changing world of entrepreneurship, you have to know the difference between making money and saving money.

Making money is about getting your business off the ground and having enough revenue to sustain itself. Saving money is about preparing for future growth by securing cash reserves and investing in ways that will increase revenue down the road.

What's the best way to start? It all depends on your personal priorities. You can start with a side hustle, or you can get involved in another area like marketing or sales. It's all up to you!

Remember: if you want your business to succeed in this day and age, you need both making money and saving money.