Is your business secretly unhealthy? Even to its owners, an ailing business can look healthy on the outside… until it succumbs to financial disaster.
As a Business Owner, keeping your business alive and thriving is up to you. Ready to give your company a check-up? Answer these three big questions to give your business the financial check-up it needs.
Business Health Question #1: Is Your Safety Net In Place?
Your safety net includes two essential parts:
- An emergency buffer account.
- The right mix of insurance coverages.
Your Security Buffer, which lives in your Pay Yourself First account, should hold money to cover at least three months—preferably up to 12 months—of your personal, basic living expenses. Remember: Your buffer is a hands-off account. It’s only for emergencies—not for forgotten expenses or an impromptu shopping spree.
Your insurance protects your business and your family from significant risks. For yourself, you may want to purchase these coverages:
- Home insurance;
- Auto insurance;
- Health, dental and vision insurance;
- Life insurance;
- Disability insurance; and
- Long-term care insurance.
But your company might benefit from business-specific insurance coverages like:
- Liability insurance;
- Workers compensation insurance;
- Errors and omissions insurance; and
- Business interruption insurance.
Talk with your financial advisor, insurance agent or trusted expert about which insurance coverages are necessary and appropriate for both you and your business.
Business Health Question #2: Where Is Your Debt Taking You?
As a Business Owner, keeping accurate financial records is absolutely essential. Not just to avoid trouble at tax time, but also so you can properly measure your business’ health.
Remember that debt in a business is not necessarily a bad thing. You may incur debt…
- As you launch your business;
- When you invest in a promising, new initiative; or
- When you purchase inventory.
But you may also rack up debt by…
- Overspending in your business;
- Shelling out for unnecessary fees; or
- Trying to expand too quickly.
So where is your debt taking you?
Good debt yields a benefit that far exceeds not only the amount borrowed, but also the interest payments. And taking on some good debt temporarily can set you on the path toward growing your business, increasing your profits and accelerating your journey to Freedom. Review your ledger carefully to see which of your debts are advancing your business interests and which are blocking your path to Freedom.
Business Health Question #3: Is Your Business Funding Your Freedom?
The key to Financial Freedom is simple: Send your money out to work for you. That means setting up your income and expenses so that you have enough cash coming in not just to cover those expenses but to build your Freedom Generator. And when the investments in your Freedom Generator produce more than enough money to cover your expenses, you are truly free.
As a business owner, your business is an integral part of your path to Freedom. If you’re operating a Legacy Business, you’re looking to create a company whose eventual sale will largely or entirely build your Generator. And, if you’re running a Profit Business, you’re looking to craft a streamlined company whose profits will build up your Freedom piece by piece.
You may own a business because you created an incredible product, you love the industry or you want to be your own boss. But, at the end of the day, funding your Freedom is your business’ main purpose.
So ask yourself these questions:
- Do I know what type of business I’m running?
- How much money do I need to make to reach my Freedom Number?
- What is the timeline I need to meet to reach my ideal Freedom date?
- How is my business currently performing against my Freedom goals?
- What can I do now and in the future to improve my business’ contribution to my Freedom?
Ready to play doctor? Make a check-up date with your financial records. By tackling our healthy business checklist, you’ll ensure your company is primed and ready to act as an accelerator for your personal Financial Freedom.
image credit: Bigstock/lenets
Makaylah Rogers is the co-founder of MindShift.money. She is a Thought Leader for her generation, teaching people how to rewrite their “money rules.” With an extensive background in wealth building and personal development, Makaylah’s path has taken her into executive roles in various fields including launching startups, real estate sales and motivational keynote speaking.