Bruce Helmer and Peg Webb
Small businesses aren’t as small as you might think. They drive 44% of the U.S. GDP and employ more than 60 million Americans, according to U.S. Chamber of Commerce estimates.
Yet despite their impact, many small-business owners overlook financial planning, often waiting until it’s too late. In fact, 78% of business owners expect to fund their retirement by selling their business, but 60% haven’t met with a financial adviser, according to BizEquity. That’s a risky approach, and one that can leave many business owners unprepared for the future.
Financial planning isn’t just about investing — it’s about creating a strategy to ensure your business success translates into long-term personal financial security. Whether you’re looking to grow, manage risk or plan for an eventual exit, a sensible financial plan can help you make informed decisions and avoid common pitfalls.
Why small-business owners need a financial plan
A well-crafted financial plan provides business owners with clarity, stability and control. Here are three key reasons how a plan can benefit you:
• 1. Managing cash flow — You know that cash flow is the lifeblood of any business, but it’s also crucial for personal financial stability. Poor cash flow management can lead to business failure, but it can also impact your ability to save for retirement, pay down debt or reinvest in growth. Planning helps balance income and expenses while ensuring liquidity when it’s needed.
• 2. Preparing for growth — If you’re like many business owners, the value of your business represents the majority of your net worth. Growing that value takes intentional planning. A solid financial plan integrates business expansion with personal wealth-building, ensuring both are moving in the right direction.
• 3. Managing risk — Entrepreneurs take risks every day, but some risks can be mitigated with smart planning. Many business owners have a dangerously high concentration of their wealth tied to their business. If market conditions change, or if personal circumstances force an unexpected exit, an unprepared business owner could see years of hard work disappear. A strong financial plan builds buffers against these risks and creates options for when things don’t go as planned.
Aligning business and personal financial goals
A common mistake business owners make is treating their business and personal financial goals as separate. The truth is, they are deeply connected.
On the personal side, owners may have retirement goals, a desire to build generational wealth or aspirations for charitable giving. On the business side, they may focus on profitability, achieving scale economies and eventually transitioning the company. A smart financial plan aligns both — ensuring that as the business grows, so does the owner’s personal financial security.
For example, a business owner reinvesting all profits into expansion might overlook the need to build a retirement fund. Without a separate savings strategy, they risk being entirely dependent on the business’ sale, which isn’t always guaranteed. A strong financial plan can help set milestones that support both business success and personal wealth accumulation.
The importance of diversification
Many small-business owners have the majority of their wealth locked up in their business, leaving them vulnerable to financial downturns. Diversification helps mitigate this risk.
Consider utilizing tax-deferred accounts such as a SIMPLE IRA or 401(k) to grow retirement savings without immediate tax burdens. Tax-advantaged accounts such as a Roth IRA or Health Savings Account (HSA) provide additional tax-efficient savings opportunities. Taxable investment accounts can also provide flexibility, offering liquid assets that aren’t tied to strict withdrawal rules.
By strategically spreading investments across different tax treatments, you can balance their immediate cash flow needs with long-term financial stability.
Liquidity strategies
Many business owners assume they need to sell their company outright to generate retirement income. However, there are other ways to create liquidity without giving up full control.
• Strategic partnerships or partial sales — Selling a portion of the business to a like-minded investor or colleague can provide immediate capital while keeping an active role in operations.
• Minority or majority recapitalization — Bringing in outside investors allows owners to extract cash from the business while maintaining influence.
• Employee stock ownership plans (ESOPs) — Transferring ownership to employees can provide significant tax advantages while allowing the business to continue thriving.
Each of these options has unique tax and structural considerations, so working with a financial expert is essential in determining the best approach.
Plan today for the future you want
At its core, financial planning for a small business is about preparing for the future. A thriving business is a wonderful achievement, but it’s only truly successful if it translates into lasting financial security.
If you’re a business owner, ask yourself:
• Do I have a plan for steady income in retirement?
• Is my personal wealth growing alongside my business?
• Have I explored tax-efficient strategies for diversification and liquidity?
A well-structured financial plan doesn’t just protect what you’ve built — it helps you make the most of it. Take the time to craft a strategy that supports both your business and personal financial goals. Your future self will thank you.
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The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.
Bruce Helmer and Peg Webb are financial advisers at Wealth Enhancement Group and co-hosts of “Your Money” on WCCO 830 AM on Sunday mornings. Email Bruce and Peg at yourmoney@wealthenhancement.com. Securities offered through LPL Financial, member FINRA/SIPC. Advisory services offered through Wealth Enhancement Advisory Services, LLC, a registered investment advisor. Wealth Enhancement Group and Wealth Enhancement Advisory Services are separate entities from LPL Financial.
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