Fall 2013 Wine & Finance – Entrepreneurs: Nuts and Bolts

Wine and Finance event Oct 2013

Our theme for this quarter’s event is Entrepreneurship: Nuts and Bolts. Many here ARE entrepreneurs – or WANT to be entrepreneurs – or perhaps are recovering entrepreneurs. It’s a special breed. Entrepreneurs are, by nature, passionate, visionary and optimistic. The event’s speakers have much experience working with entrepreneurs.

John Pompay is the owner of The POMPAY GROUP, which specializes in helping nonprofits and small businesses grow.

Elena Volkova is founder and partner in the law group ROIZIN and VOLKOVA, She is a lawyer specializing in small business and family and estate law.

Jasmine Takanikos is a marketing and branding specialist, with her own business, a consulting group. She also teaches at Parsons School of Design. Follow her on Twitter: @jasjtakanikos

 Entrepreneurs Need a Plan

One problem entrepreneurs have is that they live their business so absolutely that they forget to plan some other important details. Entrepreneurs, just like everyone else, need a plan. But for small business owners, the challenge is that much harder – there is no time to focus on whatever is not on the front burner. But it’s important to think about long term issues, especially retirement. Which is unfortunate, because entrepreneurs and small business owners – especially solo or a small partnership – have some retirement savings opportunities that salaried wage earners don’t have.

The main issues to anticipate, at a bare bones level, are:

A REVENUE PLAN:  How will you get money in the door?

A CASH FLOW PLAN:  What happens once you have money coming in? How will it come in the business and where will it end up?

A TAX PLAN:  What is the most effective solution for paying the least amount to the IRS while obeying the law and being fair to your employees?

Fundamentally, there are a few keys areas to consider for business owners. These include:

• Current Foundation – This is your debt, cash flow, cash reserves, and how you manage your day to day business.  This is where most new entrepreneurs place most of their attention, and rightly so.

• Goal Planning – This is the ongoing financial planning that translates your strategy into specific behaviors you do every day that bring you back to your financial goals.

• Investing – Most people think of small business retirement plans as the only thing that falls under the investing category, but it can also address investing in business-owned real estate and taking a laddered approach to organizing cash.

• Taxes – You want to make sure you’re taking advantage of all of the deductions, deferrals, and depreciation you qualify for. And you need a way to track and manage those things so you’re not stuck with a grocery bag full of receipts, come tax time!

• Risk Management – Whenever you see the word “risk,” just remember that it’s just a fancy name for insurance.  Without going into all of the types, insurance for your business is simply to protect what’s relevant to your business, from computers and equipment to your actual ability to earn income and cover expenses.

• Succession Planning – For most entrepreneurs, the idea of atransition out of their business seems far away. But as the adages goes, “begin the the end in mind.” Succession planning looks at how you think you could exit this business in a few scenarios, both smoothly and in case of emergency.

Some Basics for New Entrepreneurs

Keep finances separate. That means separate checking accounts and credit cards. Do not mix the money! If you are an LLC or an S Corp, then your income is REVENUE MINUS EXPENSES, so it doesn’t matter how you calculate your “wages.” You can lose the  liability protection of an LLC or corporation, exposing your personal assets, if lawyers can show that you were commingling business and personal money.

Establish business credit. Even if you are a sole proprietor, I encourage you to get a Federal Employer Identification Number or EIN, even if you don’t intend to hire employees. The EIN is like your business’s social security number, and you can start establishing credit in its name that is separate from your own personal credit.  When you get that separate bank account, open it in the name of the business and EIN, and then get a credit card.

Use cash management software. Again, don’t carry around a bucket full receipts, waiting for April 15. You need to understand your profitability, and it’s difficult to get a handle on if you don’t have a system that captures income and expenses.

Hire a bookkeeper. They know their business, and it’s likely a better use of your time to hand it off to an expert.

 

Blue Spark Capital Advisors

We're a fee-only Registered Investment Advisory and financial planning firm based in New York City and the Berkshires.

We specialize in working with women after divorce, death of a spouse, or other life transitions such as retirement or job change. We provide financial planning and investment management services.

We believe in a holistic approach. Movement in each piece of your financial plan impacts the others, so we consider your entire picture.

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New York, N.Y. 10011
(212) 537-3899

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Lenox, Mass. 01240
(413) 551-7000

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