The Small Business Owner’s Guide to Financial Wellness

Dylan Telerski / 3 Mar 2020 / 401(k) Resources, Business, Ubiquity Insights

Small business owners face unique financial challenges.

In addition to managing your own finances, you must also focus on your employee’s financial wellbeing to ensure team success. In fact, according to a 2019 John Hancock study, 55% of workers say they worry about their personal finances more than once a week at work.

A trending benefit in today’s workforce is to offer a financial wellness program as an employee benefit. These programs focus on financial education and help to create a culture of financial literacy and awareness. In turn, this builds a strong foundation for employee happiness and retention.

Focusing on financial wellness at your organization can benefit both employees and business owners in very different ways. Use these tips to help guide the areas you want to improve on and strategies that may make your business financially healthier.

 

Monitor Your Finances

Did you know nearly 1 in 4 of small businesses fail because of a lack of strength from the leadership team?

There are so many moving parts when operating a business that you can’t expect to do them all yourself. It’s easy to let your own personal financial health take a back seat while you’re focused on building your business.

Luckily, there are many options that make it convenient to manage personal finances. From personal banking to financial planning, apps are abundant.

Small business banking options reduce the pains and cost of financial management. You can better keep track of your spending and transactions. You can also keep your personal and business finances separate from each other.

As a business owner, you should know where your money is coming from and going. This clarity around your financial basics can strengthen your planning and strategy.

Don’t Neglect Your Salary

Running a small business is no walk in the park. It takes passion and dedication to get a business off the ground.

Unfortunately, small business owners tend to invest all their time and energy into their business. This can result in other areas of their personal life or business getting neglected.

Starting out, small business owners are prepared to work for free to support their growth. What most don’t realize is that they should determine their salary ahead of time. Then, once their business is profitable, they can start paying themselves the salary they deserve.

To determine your salary, take the following into consideration:

• Your mortgage payments
• Outstanding debt like student loans, car payments, credit cards, etc.
• Groceries
• And other fixed and variable expenses.

While no entrepreneur wants to dwell on it, it’s important to remember that roughly 20% of small businesses fail within their first year. 33% will fail within two years.

By including your salary in your business finances early on, you can protect yourself. Even if your business takes a downturn, your personal finances won’t be affected.

Conduct an ROI Analysis

Small business owners tend to struggle when calculating a return on investment (ROI). ROI is a key performance indicator. It helps measure success over time and to keep their finances in check. Using the right cash flow method is important when determining your profitability with expenditures.

Knowing your ROI, you can make smarter choices for your business. Investing too heavily or lightly can greatly affect your business trajectory.

Investing in technology like financial tools is a business expense. And it often gets pushed down the to-do list from small business owners. However, these tools can provide value and maximize your finances in many ways.

Invest Wisely

Speaking of investing—The best thing that you can do for your business is to invest in it.

The term “investment” often sparks fear in any startup, freelancer, or entrepreneur’s mind. This is because the first thought you’ll likely have is, “What if I fail or lose all my money?” This is especially true when your finances don’t match your business plan and goals. It’s important you do your research and find areas where investing makes sense.

Investing doesn’t only mean buying tools and equipment to help your business grow. It can also mean investing in financial tools and wellness products.

Financial wellness tools can help you make better sense of your own finances and your small business 401(k). They can also guide your employees to smarter financial decisions.

Financial Wellness for Employees

Your employees also need financial guidance. A majority of Americans are stressed about their personal finances.

Financial wellness programs give employees financial guidance when they need it. This can help them make smarter, more confident financial decisions.

These platforms include education, strategies, and personalized guidance on a variety of financial topics.

As you build your organization, keeping financial wellness top of mind is smart.

A strong financial wellness can reduce stress and create a clearer path to success.

Want to learn more?

We’ve partnered with Edukate to help small business employers and employees plan for their retirements fully. Click here to read our previous conversation with their team about how financial wellness programs can help set your small business apart.