Why Business Owners Need an Integrated Business Plan to Manage Their Finances

Business owners spend years building their business into something that not only represents their passion and interests, but also is a significant asset contributing to their personal net worth. That being said, there is often little time devoted to how the value of the business fits into the owner’s personal financial plan. Understanding what you need from the sale of your business to have financial independence and security for you and your family is crucial. This is what you work so hard to achieve and integrating your business plan into your personal financial plan can be the key to creating financial freedom. 

What’s an integrated business plan? What does it take to create a “clear picture?” How does my business planning relate to my personal financial planning?

These questions may not be obvious to business owners who are necessarily focused on their business’ bottom line. Between managing employees, business development, production and supply chain issues, and accounting, there is often little time or energy to think about personal financial goals and how they integrate with business goals. Many business owners have heard the saying “work on your business, not in your business.” The same is true for your financial life – it is critical to work on your integrated financial plan, not just in it!

A simple analogy might be that of building your dream home. If you were building a house and decided to order lumber, nails, roofing tiles, and other building material before you had a clear set of architectural and engineering plans reflecting the home design you wanted, how would you know if you have enough materials? Would you be missing certain key items? Would you have an excess of certain items? Perhaps you would get lucky and come out with the home of your dreams, utilizing all the exact materials you had pre-ordered without any shortfalls or change orders. For most of us, purchasing all the materials and supplies in advance of having any design or build plans would be a recipe for disaster!

Much like the architectural and design plan for your dream home, having an integrated financial plan that incorporates your business and your personal life establishes a strong foundation from which all the “rooms in your financial house” can be designed and built.

How do I start working on my integrated business plan?

This is a natural next question, and whether you are an established business owner or one in the early stages of a growing enterprise, the place to start is the development of a comprehensive financial plan for you and your family. This comprehensive plan will identify:

  • An understanding of your current personal spending and what level of spending you can support in the future.
  • If you wish to pursue new interests or opportunities in the future, how much capital might you need and when?
  • An investment strategy that protects your hard-earned capital and allows for growth over time.
  • An assessment of risk management in all areas of your financial plan, which might include using insurance.
  • Legacy and estate planning to ensure that the transfer of your wealth reflects your values and wishes and is one that is tax efficient and easy to follow.

Spending the time to thoroughly identify each of the above components will result in a clear picture – an integrated plan that not only illustrates the “design” you are after for you and your family’s financial wellbeing, but all the materials, tools, and “engineering” required to build your dream!

Who should be part of this process? Who are key team members or trusted advisors?

A comprehensive and integrated plan will incorporate many areas of your financial life and align your business and personal goals. From tax planning to insurance needs to legacy planning, all are important and contribute to a well-developed and thorough plan. Involving specialists who can be part of your team of trusted advisors will ensure that each area of your financial plan reflects current economic conditions, tax codes, and other considerations. Coming back to the analogy of building your dream home, using construction and crafts people with experience in areas such as interior design, heating and cooling, or custom cabinetry will result in a home that is not only tailored to your unique needs and desires, but is also well-constructed and built to last.

In addition to your financial advisor, your financial team will include other trusted advisors with expertise in the areas of estate and trust planning, tax planning and preparation, insurance needs, and philanthropic giving. Business owners may also have an executive coach, a business transaction attorney, and a bookkeeper as part of their network. These team members bring something unique and important to the process, leading to a thoroughly integrated plan and a better outcome.

Are there different concerns for female business owners?

Female business owners not only have many of the same questions and concerns that male business owners have, but typically are faced with additional issues related to their personal financial planning. These issues include:

  • Longevity – Women have a longer average lifespan than men[i] and have to plan for their resources to last longer.
  • Caregiving – Women tend to be the primary caregiver for their children who are not yet adults, along with aging parents in need of assistance.[ii] This can impact time available for growing their business.
  • Earnings – Women business owners face the same historical dilemma that working women in general face, which is the fact that in the U.S., women earn about 83% of what men earn for the same work.[iii] Although women have moved into industries and fields that have greater earning potential such as technology, engineering, and science, they still own businesses and have careers predominately in less lucrative areas.
  • Risk Tolerance – Although this isn’t always true, women tend to have a lower risk tolerance than men. We aren’t as likely to take as much risk as our male counterparts, and this is generally the case with our investments. As a result, the gain on investment value may be lower over time for female-owned portfolios.[iv]
  • Funding – Recognition of the growing number of women-owned businesses and the contribution being made to local communities and the broader economy has given rise to more and more funding sources for companies owned and operated by women. From SBA loans to grants to seed stage financing, there are many sources of capital available to women, and this trend continues to increase.

Despite these additional challenges, women are in a unique position to thrive both professionally and personally. Having an integrated plan that incorporates scenarios to model a longer lifespan, the potential cost of caregiving for aging parents or other loved ones, or early retirement after selling a successfully built company, is critical to ensure that women business owners are on the path to financial security for themselves and their family.

What else can I do to work towards creating an integrated plan?

Here are some of the questions that a comprehensive personal financial plan will help you to answer related to your business:

  • What is my number? How much do I need to sell my business for in order to achieve my personal financial goals?
  • How long might it take to build the desired value in my business?
  • Can I accept a sales structure that includes a stream of payments over time?
  • Can I afford to gift some or all of my business to family or key employees?
  • How do I minimize the impact of taxes on the sale of my business?
  • How do I ensure the transition of wealth created from my business to my heirs?

A well-developed comprehensive financial plan will be instructive and help to guide you in decisions you make as a business owner, both in how you operate your business and how you plan to monetize it. It is the master plan for building your financial “dream home!”

Wealthspire Advisors is the common brand and trade name used by Wealthspire Advisors LLC and Private Ocean, LLC, separate registered investment advisers and subsidiary companies of NFP Corp.
Certified Financial Planner Board of Standards, Inc. (CFP Board) owns the certification marks CFP®, Certified Financial Planner™, and CFP® (with plaque design) in the United States, which it authorizes use of by individuals who successfully complete CFP Board’s initial and ongoing certification requirements.
CERTIFIED DIVORCE FINANCIAL ANALYST® or CDFA® professionals must develop their theoretical and practical understanding and knowledge of the financial aspects of divorce by completing a comprehensive course of study approved by the Institute for Divorce Financial Analysts (IDFA). CDFA® professionals must have two years minimum experience in a financial or legal capacity prior to earning the right to use the CDFA® certification mark.
Please Note: Limitations. The achievement of any professional designation, certification, degree, or license, recognition by publications, media, or other organizations, membership in any professional organization, or any amount of prior experience or success, should not be construed by a client or prospective client as a guarantee that he/she will experience a certain level of results or satisfaction if Wealthspire is engaged, or continues to be engaged, to provide investment advisory services.
This material should not be construed as a recommendation, offer to sell, or solicitation of an offer to buy a particular security or investment strategy. The information provided is for informational purposes only and should not be relied upon for accounting, legal, or tax advice. While the information is deemed reliable, Wealthspire Advisors cannot guarantee its accuracy, completeness, or suitability for any purpose, and makes no warranties with regard to the results to be obtained from its use. © 2024 Wealthspire Advisors.

[i] https://www.census.gov/content/dam/Census/library/publications/2020/demo/p25-1145.pdf
[ii] https://www.cdc.gov/women/caregivers-covid-19/index.html
[iii] https://www.payscale.com/research-and-insights/gender-pay-gap/
Kelly Keydel

About Kelly Keydel, CFP®, MBA, CDFA®

Kelly is a managing director and advisor in our Seattle office.

View all posts by

Related Posts

RSUs

Restricted Stock Units (RSUs) – How They Work & 6 Common Misconceptions

RSUs are a form of compensation issued by employers to employees in the form of company equity, or shares. RSUs ...

sunset tax cuts and jobs act

The Sunset of the Tax Cuts and Jobs Act: Financial Planning Considerations

When the Tax Cuts and Jobs Act (TCJA) went into effect in December 2017, it enacted several major changes, including ...