Over the years I have been a business owner. During this time certain questions are constantly on my mind: how do I take control of my future, am I on track for retirement? I am not alone. These are questions often asked by small business owners. As a CERTIFIED FINANCIAL PLANNER®, I am going to give you the list I give my clients as the critical seven steps to financial independence for a small business owner like you.

Let’s get started toward your independence.

Step One – Determine Your Current Financial Assets

For you to know where you are now and determine where you might be in the future, gather all your checking account statements, investment statements, latest tax returns, business documents including profit and loss statements, insurance documents, spending history loan documents, and current estate documents. Use these documents to look at where you are now and likely to be in the future.

You can determine your net worth statement, generated cash flow, and income projections, all can be determined from this information.

As a business owner, you can use any of this tools to create these helpful documents Microsoft money, www.mvelopes.com, www.mint.com, or Quicken.

Step Two – Set Goals for Financial Independence

Every business owner should be determined to save and calculate how much in extra savings they need to achieve their financial independence and retirement goals. To identify the target savings for you to meet your future financial goals, there are a variety of online calculators that can help you achieve that. Ensure to be very careful with online calculators because most of the assumptions used in the calculators can significantly impact the results you will get. Another way to determine a target number is to make use of 4% SAFE withdrawal rate in your retirement plan. The 4% rule is a not a bad indicator to determine your preparedness for your financial independence.

E.g: If you are a business owner with $3 million dollar investment portfolio you can create a $120,000 income stream and increasing yearly with inflation before taxes. With this rate, your portfolio should be able to last for about 30years or even longer without you running out of money. Apart from your retirement goal, you also need to inculcate other goals to increase the amount required.

Here are few examples of other goals you can include: vacation properties, paying for college for kids or grandchildren, charitable intentions, and traveling.

Step Three – Determine the Difference

The next step is to determine the gap between your projected expenses and your expected income in retirement and then plan to fill in the gaps.

Step Four – Maximize Your Savings

As a business owner, you already have a number of ways to help build your savings. You should, therefore, maximize your defined contribution plans.

Up to $50,000 can be contributed If you are over age 50, $55 with the maximum of 500 allowed as the contribution. Make use of a clearly defined benefit plan that allows for higher contributions to make up ground for retirement savings as the case may be.

Depending on your income, try to contribute to an IRA, Roth, Spousal IRA, Non-Deductible IRAs as allowed.

Other possibilities may include you using 529 College Savings accounts, HAS (Health Savings accounts), or building a taxable savings account.

Step Five – Review Your Insurance

From my experience, I have seen that business owners typically have huge gaps in their business or personal insurance programs. Resolve to carry out a total review of your insurance program. Meet with your insurance agent to evaluate your insurance risk.

Determine your disability insurance, life insurance,  long-term саrе іnѕurаnсе, рrореrtу аnd саѕuаltу іnѕurаnсе, business insurance and health insurance e.t.c. Be sure to shop around and verify that you are actually receiving the best value for the premium dollars you are spending and then make sure to carry out the appropriate implementation.

Step Six – Do Some Basic Business Planning

Develop a marketing plan and a business plan, then run your business like a real businessman. Put measures in place to monitor your progress, and readjust as needed.

You might want to consider:

  • Profit
  • Clients satisfaction
  • Acquiring new clients
  • Employee satisfaction
  • Expenses etc

Areas to look at for:

  • Are you in need of marketing help?
  • Do you want to focus and develop a niche for your business?
  • Do you have the right systems in place to manage your business?
  • Do you need to improve clients retention?
  • Review of your premium insurance to improve value for your money
  • Investigate to determine that you have costs of maintaining your retirement plans
  • Do you have a good working team?
  • Do you have a good place?
  • Do you have an exit strategy for your business?
  • Do you have a buy or sell agreement or plans to bring in future buyers?
  • Are you using the right tools and outsourcing to improve profitability?
  • Are you maximizing all deductions available to the business?
  • Do you have any future plans in place should in case any key employee or even you dies or become disabled?
  • Are you considering a building for your business instead of paying rent?

The whole essence of this is to achieve your financial goals and to maximize the amount you take out of the business while providing the necessary investment back into the business.

Step Seven – Other Areas of Your Plan to Consider

This is the last and seventh step of Seven Steps to Financial Independence. Planning cash flow can at times be a difficult task. However, having a clearer picture of expenses now and in the future can ensure a successful retirement. Therefore, you need to be able to determine your personal income needs and cash flow.

  • Use the pay yourself first tactics to help jump-start your retirement savings.
  • Manage and review all personal and business debt. Don’t overlook this aspect
  • Use the right strategies to increase your net worth and avoid consumer debt.
  • Determine if your investment strategies include maximizing return, preserving capital and risk balancing.
  • Explore and take advantage of all available opportunities and conduct a tax planning review.
  • Have a plan in place to pay for your children’s college education by utilizing pre-tax dollars to pay their college fees.
  • Review and ensure appropriate estate planning documents are intact.

With the right planning in place, any business owner can take care of their finance, their families, and their retirement. There is no shortcut to this except you put in the time and effort needed for you to achieve your goals and take total control of your financial life.

Some of these aspects will be easy to put in place. Others will be difficult or impossible. Take heart knowing that with help, you can get the Seven Steps to Financial Independence in place and be on the road to retirement.

And we are here to help with any or every aspect of this planning. Let’s talk.