Whether you’re thinking about turning your side hustle into a full-time job or launching an entirely new business, there are many factors to keep in mind as a female business owner. It’s crucial to be both strategic and proactive about business finances and personal finances. Since your personal finances depend on the success of your business, it’s important to nurture both.
Have you considered what type of entity to start (sole proprietorship, S-Corp, C-Corp, LLC)? What are the differences between these entities? Who are your competitors, how do they charge, and what are they doing to promote or grow their businesses? Do they have an e-commerce website, what technology does it use? Have you considered how you can scale quickly if sales are wildly successful?
All these questions make it essential to spend some time charting a course for success. It helps to have a team of experts available to help, as well. It may help to consult with a wealth advisor, lawyer, and accountant to help you understand how to form your entity, position your business for growth, save for retirement, and thrive. We’ve put together a list of nine essential considerations for launch.
1. Establish a solid financial plan for the business.
A business financial plan should include business goals, budgets, cash flow projections, and revenue targets; and will help you stay on track to reach those goals. A Boston Consulting Group study found that female-owned or co-owned startups produced more revenue than male owned/co-owned startups.1 A business plan is also a must for exercising business loans or financing.
2. Keep personal and business finances separate.
As a small business owner, it’s easy to get into the habit of moving money back and forth between personal and business accounts. Be sure to pay yourself a salary from your business to help keep your personal finances on track and remove the temptation to go into the business account if cash flow is tight.
3. Create a personal financial plan.
Like a business financial plan, a personal financial plan is a road map that will help you get to where you are going. Your personal financial plan should include cash flow and budgeting for lifestyle expenditures, savings targets, investment allocation, and estimated sources of income. Your personal financial plan should also help your net worth grow over time. Be sure to revisit the financial plan annually. For more information on how to plan and budget based on your age, read our blog, “Women: How to Slay Your Money Dragons at Any Age.”
4. Keep emergency cash on hand in both your personal and business finances.
82% of small businesses fail because of cash flow problems2, so emergency cash reserves are important. On the personal side, there should be a minimum of three months of lifestyle expenses in a cash reserve. On the business side, there should be one month of business expenses in an emergency fund. Be sure to review your spending habits and do monthly accounting in both personal and business accounts.
5. Be smart about financing.
Women need to be proactive about financing and funding sources. Women are less likely to ask for funding compared to their male counterparts. Female-led businesses typically receive less funding for their business than male led businesses. With less funding available, planning for contingencies takes precedence. This is why an emergency fund is so important. There are many small business loans and grants available to female business owners. It’s also important to establish a line of credit at your banking institution. This will help finance new growth strategies or handle short term cash flow issues.3
6. Keep your credit score favorable.
A solid credit history and credit score are both important. According to an Experian “Women in Business” Credit Study,4 only 46% of female business owners have a credit score of 750 to 849, compared to 51% of their male counterparts. A favorable credit rating will provide better terms on loans and other forms of credit.
7. Find a Certified Public Accountant (CPA) you trust.
Taxes are complicated, and many don’t understand the complexity of the tax codes. Your CPA should not only be competent in tax code but should also be able to explain your tax situation in a language you understand.
8. Create time for self-care.
As a business owner, you are everything from the CEO right down to the kitchen help. Whether you are balancing breadwinner duties along with shuttling kids to soccer practice or simply the household laundry, you can’t properly care for others without first caring for yourself. Be sure to schedule time for solitude and regeneration as well as time away from your business, even if it’s only for an afternoon once a month.
9. Hire a wealth advisor.
Hire a financial advisor who is a CERTIFIED FINANCIAL PLANNER® professional (CFP®) and works as a fiduciary. Create a wealth plan and active investment plan. As a female business owner, you may feel more comfortable working with an advisor who mirrors your own drive — perhaps a boss babe with an entrepreneurial spirit just like yourself. At Mercer Advisors, 51% of our client-facing employees are women, which far exceeds the industry average of 21%.
At Mercer Advisors, your wealth advisor is sort of like a conductor leading the symphony of in-house specialists who can help you position your business for success. With a collaborative team, we tailor services to your unique needs with in-house investment strategists, CFPs, CPAs, estate planning attorneys* and trust specialists** to strategically manage wealth — all under one roof. If you’re already a Mercer Advisors client, talk to your wealth advisor to learn more. If you’re not yet a client, let’s chat.
