Financial wellness should be part of your small-business strategy

By Ryan Martin

When most people think about wellness, not surprisingly, what comes to mind first are topics like mental and physical health, work/life balance and mindfulness. But financial wellness is a key contributor to overall happiness. In fact, financial stressors tend to have a negative impact on health and wellness. This is true not only with personal finance, but in business as well.

For small-business owners, finances are a significantly overlooked part of how they view wellness. Only 8 percent of entrepreneurs consider finances when they think of wellness, but it’s an especially important issue given that the lines between their personal and professional lives are often blurred.

To better understand how small-business owners think about the financial health of their businesses, KeyBank recently surveyed members of its Business Forum to gather insights on the time they spend on the financial health of their businesses, what’s keeping them up at night, and the most important financial wellness habits business leaders should incorporate into their everyday lives.

Are Business Owners Overly Confident in Their Financial Futures?

More than 6-in-10 small business owners are confident in both the financial health of their business and their personal financial future. Nearly one-half agree that managing cash flow (46 percent) and maintaining proper cash reserves (45 percent) are the most important things a business owner can do to sustain good financial health.

However, nearly half of business owners admit they do a poor job maintaining a detailed budget and another one in five say they devote too little time to understanding cash flow and maintaining proper cash reserves. This begs the question: Without a clear picture of the profits and losses, how can business owners be so sure their company is on the right track? Why aren’t they doing more to nurture the financial health of their business?

Respondents mentioned several other impediments to business health. Among them: proactively assessing risks to the business and knowing when to spend money on expansion and upgrades.

Running a small business is a tremendous commitment — it’s more than a full-time job. All of the important details and decisions wind up on an owner’s desk, which means they may not have enough time to address important challenges.

For many owners, the constant pressure to consider revenue fluctuations and ensure there’s a proper cash cushion means that other important aspects of the business are deprioritized. For example, one-third of business owners believe they neither devote enough attention to investing in their workforce nor to enhancing the well-being of employees.

Additionally, 45 percent spend too little time leveraging the latest technology to cut down on costly inefficiencies. Other challenges include time for strategizing ways to reduce operating costs and managing inventory appropriately.

Improving Financial Wellness

Having the right team of experts in your corner can set you up to address the many challenges you inevitably will face as a business owner. Even if you feel positive about your current financial health, you can never be complacent. And KeyBank offers expert guidance and a full suite of small-business solutions to help optimize your financial health, regardless of your financial confidence.

Proper Planning Leads to Small Business Success

Small-business success stories are often the result of hard work and careful planning. If you’re thinking of starting this journey, it pays to set your business up correctly right from the start. You’ll need to properly register your new company, draw up a strategic plan, and make important financial decisions. You’ll also want to develop a trusting relationship with a business banker who can help guide you through the process.

Determine Your Vision

Understanding where you’re starting from and where you want to be in five years helps you set both short- and long-term financial goals. Do you want to grow from a home-based business to a company with 20 or more employees? Or are you happy to stay small-scale and serve a niche audience?

Writing a Business Plan

Once you decide on the business you’re most passionate about, be sure to have a formal business plan. Not only will it show that you’ve given thought as to how you’ll run the business, but it’ll also set you up for success. According to the Small Business Administration, the traditional plan looks at nine separate items, including a market analysis and financial projections. You can also write a brief version of the plan, especially if you don’t have all of the information yet.

Register Your Business

If you’re applying for a business loan or line of credit, be sure that your business is registered and that you obtain a separate Tax ID number. You may also want to speak to a lawyer or tax advisor about the best way to structure your new company. Many options are available and some may work better for you based on your company size, sales volume and the type of business.

Find a Location

According to the SBA, home-based businesses account for approximately 50 percent of all businesses. If you do operate from your home, you’ll still want to take steps to formally set up your business, such as renting a P.O. box and clearing out a space to work. For retail establishments, the U.S. Census Bureau provides online tools, including a location evaluator that will tell you how many similar businesses are already in existence in your city or town.

Funding Your Business

Separate their personal finances from the business as much as possible. This can be as simple as opening a separate bank account to pay business expenses and using a business credit card. You should also talk to your insurance agent about purchasing a separate business insurance policy.

Ryan Martin is the senior vice president and regional retail leader of KeyBank’s Utah Market.