Have you ever considered how similar taking care of a family is, to the running of a business? There are certain criteria that need to be met for both operations to run as smoothly and seamlessly as possible.
In the same way you’d plan out a budget to take care of your family’s needs, or to make sure they were provided for should the worst happen, a lot of these same methods can be successfully adopted by business owners to make their own projects work well.
Today, we’re going to look at the seven family finance tips that business owners can adopt to ensure greater success.
Good sensible day to day family finance stems from having a budget in place and learning how that works, plus how to deal with every day issues like over spending or managing on a restricted income.
Finding out how incomings match outgoings and how these are both managed can help someone starting out in business learn how to develop and manage their own budgets long term.
You might not think so but planning a weekly shop and knowing exactly how much you have to spend on it can teach you a lot about how to manage bigger budgets, where every single cent counts. It’s sometimes the smaller things that can help you imagine the bigger picture.
Your chief aim as a business person might be to simply grow and expand your company, or your client base over time. To do this, you’ll need to borrow more money than you save.
This provides a juxtaposition to the aim of your family and personal finance, which is to save more for the future.
There sometimes needs to be a balance between the two to succeed in business, and many people owning a company don’t always put this into practise. Finding the right mix of investing and saving that works best for you will not only help your business grow, but also help your personal finance too.
Think about saving more money when times are good, so that when things aren’t going so well you have a nest egg to fall back on, as well as a little extra to invest and hopefully boost your fortunes again longer term.
In a family set up, when an appliance goes wrong, your car breaks down or some major work needs to be carried out on the home, you may need to borrow money, or use a credit card to fix the issues.
It’s the same for business. There will be times when you need to borrow money to make more investments, or periods when you need more capital.
At home, you’d look around to find the best credit card deals, or perhaps go in to your bank manager to talk about re-mortgaging or taking out a sensible loan.
In business, you’d need to do the same to plan your finances better. If you need to look at external means of financing your business, take the same care you would if you were managing your money at home, read the small print, look to the finer details and make sure you’re aware of any extra hidden costs that might come as a nasty shock otherwise.
If you know exactly what your costs are, how many products you sell and what the market is for your business then you’ll find it much easier to make a profit.
Knowing exactly what your outgoings are, compared to what you have coming in will put you in a unique position to understand how to change your business and move it forward further down the line. Not only that, it will put you in better control of the situation if you start to lose money.
In a typical family set up, and if both partners are employed, it’s likely they’ll have a company pension scheme in place or will have made their own plans.
In business, it is the same. More so if you employ more than one person. You need to ensure you can give any contracted employees a workplace pension. Just as you’d sign up for something similar if you were in a corporate environment, as a responsible business owner you should investigate protecting yourself and your workers under a workplace pension scheme.
No-one likes to think about bad things happening, but it’s a fact of life that illness, injury, or just plain and simple old age will catch up with us at some point.
In those times you might want to think about giving up your business, or simply letting it continue without you at the helm.
There are many changes we know might come to us, such as retirement, but we can’t plan in such a clear way for things like a divorce, or ill health, or even substantial changes to the economy.
Make a clear and well thought out plan for these times in terms of finance and cover every eventuality. If necessary, talk to staff and let them know and involve any financial institutions who may need to step in and help in dire circumstances.
Again, it’s a point that not many people want to think about or discuss, but just as you need to think about a plan for times of trouble, you’ll also need to think about a plan in the event of your untimely death.
Just as someone dying intestate can create problems for the family members who are left behind, so can the death of someone owning a business who hasn’t made the right provisions.
Draw up a ‘will’ for your business and make sure it is legal and water tight. You need to know that in the event of a premature death, assets including your business are transferred over to the people that you want them to go to – and to make sure you have discussed the situation with those same people too, so they’re aware and not left in a state of shock and bewilderment.