Comprehensive Financial Planning for Entrepreneurs 101

Building Confidence and Clarity as a Business Owner

Entrepreneurs often operate in dynamic environments where financial situations can shift quickly. Unlike traditional employees, business owners may face fluctuating income, complex tax responsibilities, and the challenge of balancing long-term personal goals with short-term business demands. In this context, financial planning can offer a helpful framework for making decisions and staying focused on both professional and personal objectives.

At Capital Formation Group, we recognize that every entrepreneur’s journey is different. We believe that financial planning can serve as a tool to help navigate that path, offering guidance that is flexible, adaptable, and aligned with your goals. In this article, we outline key financial planning concepts that business owners might consider, particularly when trying to coordinate their personal and business finances.

Why Financial Planning Might Be Valuable for Entrepreneurs

Financial planning may not always be the first thing on a business owner’s mind, especially during the early stages of launching or growing a company. However, it can serve as a useful foundation for managing uncertainty and organizing priorities.

Some reasons financial planning might be worth considering include:

Business success doesn’t guarantee personal financial stability.

Even a profitable business may not automatically translate into personal wealth or security if income is reinvested or not structured intentionally.

Mixing personal and business finances can introduce challenges.

When the lines between personal funds and business income blur, it may become more difficult to assess financial health or take advantage of planning strategies.

Planning may help reduce stress by offering clarity during complex decision-making.

Whether considering an expansion, taking on new clients, or adjusting pricing, a financial framework may provide useful context.

Entrepreneurs typically don’t receive employee benefits such as retirement plans, group insurance, or stock options.

These benefits must often be created and funded independently.

Aligning business activities with personal goals can lead to more cohesive planning.

Without coordination, it’s possible to make business decisions that unintentionally conflict with long-term personal priorities.

Overall, having a comprehensive financial plan might offer structure, reduce ambiguity, and help ensure that efforts in the business support a broader financial vision.

Understanding Your Personal and Business Finances

Many entrepreneurs find that separating personal and business finances allows for better organization and clarity. This separation may make it easier to analyze performance, identify areas for improvement, and pursue specific goals on both sides of the financial picture.

Here are a few concepts that could be useful when thinking about your financial structure:

Establish clear goals for both personal and business finances. Personal goals might include saving for a home, reducing debt, or planning for retirement, while business goals could focus on revenue targets, hiring plans, or expanding services.

Track income and expenses in detail. Understanding where money is coming from—and where it is going—can support better decision-making. This includes both predictable income streams and more irregular cash inflows.

Assess your “burn rate” and “runway”. These terms are often used in the startup world but can apply more broadly. Burn rate refers to how quickly you’re spending money, while runway refers to how long you can operate without new income.

Choose a business structure that fits your situation. Whether you operate as a sole proprietor, LLC, S Corporation, or C Corporation may influence taxes, liability, and available planning strategies.

Track net worth over time. Keeping tabs on both business and personal net worth may offer insight into financial progress and can inform future decisions around savings, investing, and planning for the future.

Taking time to organize and evaluate these areas may help provide a clearer picture of your overall financial position.

Budgeting and Cash Flow Management

Cash flow management is an area that many business owners find helpful to monitor closely. Since income may not arrive on a regular schedule, and expenses can be unpredictable, having a budget that reflects variability may provide a sense of financial control.

Suggestions to support cash flow planning include:

• Use a flexible budget that allows adjustments based on monthly or quarterly performance. This might involve categorizing expenses as essential or discretionary and revisiting your figures regularly.
• Establish a reserve or buffer. Setting aside a portion of revenue during stronger months may help cover slower periods or unexpected costs.
• Separate business profit from owner’s pay. Business profits may be reinvested or saved for long-term goals, while owner’s compensation should be treated as a consistent, reasonable expense based on the business’s financial position.
• Leverage technology tools to gain insight into income, expenses, and trends. Software platforms and financial dashboards can streamline tracking and reporting.
• Review spending patterns to identify areas that may benefit from adjustment. Over time, this can help support a more sustainable financial rhythm.

Budgeting isn’t about perfection—it’s about creating a system that supports decision-making and provides enough structure to handle change.

Retirement Planning for Entrepreneurs

Many business owners do not have access to traditional employer retirement plans, which means they may need to take the initiative to create and fund their own. There are several retirement savings options available that offer varying levels of flexibility, contribution limits, and administrative requirements.

Here are some plans you might consider:

SEP IRA

A plan that allows contributions of up to 25% of compensation or $69,000 in 2024, whichever is lower. It’s generally simple to set up and administer, making it a popular choice for sole proprietors or small business owners without employees.

Solo 401(k)

This option allows contributions as both employee and employer, with a total contribution limit of $69,000 in 2024 ($76,500 if over age 50). It can include a Roth component and loan provisions, which some find valuable.

SIMPLE IRA

Designed for businesses with up to 100 employees, this plan allows for employee deferrals up to $16,000 in 2024 ($19,500 with catch-up contributions). Employers are required to make matching or non-elective contributions.

Defined Benefit Plan

This option may allow for significantly higher contributions, depending on age, income, and retirement goals. It requires more administration but can be appealing for high-income earners nearing retirement.

Brokerage accounts

While not tax-advantaged, these accounts offer flexibility and no contribution limits. They can complement retirement-specific accounts as part of a broader strategy.

Tax Disclaimer: We do not provide tax advice. It’s essential to consult with your tax professional regarding the tax implications of your retirement savings strategy. Tax laws change frequently, and a tax professional can help you optimize your strategy.

Planning for retirement as an entrepreneur may require more initiative, but it can offer flexibility to align with your financial circumstances and future goals.

Managing Taxes as a Business Owner

Taxes are often a significant consideration for entrepreneurs. By understanding how income is taxed and what deductions may be available, you may be able to manage your overall tax position more effectively.

Here are a few areas that business owners might want to review:

• Understand the flow-through nature of your income. If your business is a pass-through entity (like an LLC or S Corp), your profits may be taxed as personal income.
• Plan for quarterly estimated payments. Setting aside funds throughout the year and making timely payments may help avoid penalties and improve cash flow predictability.
• Keep detailed records of deductions. This may include expenses such as office supplies, professional services, travel, home office use, and business-related meals.
• Choose an accounting method that aligns with your operations. The decision to use cash or accrual accounting can affect how income and expenses are recognized and taxed.
• Review your compensation strategy. If you’re paying yourself a salary through an S Corp, for example, you may want to evaluate how that salary compares to distributions and the related tax implications.
• Work with a qualified CPA or tax advisor to develop a proactive strategy. Rather than approaching taxes once a year, working together throughout the year may help identify potential savings and opportunities.

Tax Disclaimer: We do not provide tax advice. It’s essential to consult with your tax professional regarding the tax implications of your business income and deductions. Tax laws change frequently, and a tax professional can help you optimize your strategy.

Building and Protecting Wealth

Many entrepreneurs concentrate most of their financial energy on their businesses, which can lead to concentrated risk. While this approach may offer strong returns if the business thrives, it can also expose your personal finances to volatility.

Considerations for building personal wealth outside of the business may include:

• Diversifying your investments through taxable brokerage accounts, retirement accounts, or real estate.
• Evaluating risk tolerance and ensuring that personal investments reflect your comfort with short- and long-term volatility.
• Exploring asset protection strategies, such as establishing trusts, creating holding companies, or titling property to reduce liability exposure.
• Monitoring liquidity to ensure that you have accessible funds for emergencies, opportunities, or transitions.

Over time, wealth building may provide flexibility and resilience in both personal and business contexts.

Risk Management Through Insurance

Insurance planning may support stability in both your personal and professional life. Business owners often rely heavily on their ability to work, lead, and generate income—and insurance may help mitigate the impact of unexpected disruptions.

Types of insurance to explore include:

• Life insurance may support family members or fund business obligations in the event of a death.
• Disability insurance can help replace income if you’re unable to work due to illness or injury.
• Key person insurance may provide financial support to the business if a crucial employee passes away or becomes disabled.
• Liability coverage, including general, professional, and cyber liability, depending on your industry and business structure.
• Property and casualty insurance can cover equipment, office space, or inventory.

The right insurance coverage may vary based on the nature and size of your business, and it may be worthwhile to review your coverage regularly as your operations grow or change.

Planning for Business Growth and Scaling

As your business grows, your financial responsibilities may increase in complexity. Strategic financial planning can offer a framework for evaluating new opportunities, managing expansion, and maintaining alignment with long-term goals.

Here are some topics that entrepreneurs often explore during a growth phase:

• Revenue and expense forecasting over one, three, and five years may help clarify what level of growth is sustainable or desirable.
• Financial modeling may support decision-making around pricing, staffing, infrastructure investment, or geographic expansion.
• Evaluating debt versus equity may be helpful when considering how to fund growth. The decision may depend on your risk tolerance, goals, and available capital.
• Cash flow vs. profitability: A business may be profitable on paper but still experience cash flow shortages. Understanding the difference between these two financial measures can help prevent surprises.
• Hiring and compensation planning: As your team grows, structuring salaries, bonuses, and benefits in a thoughtful way may help support retention and predictability.
• Monitoring key financial metrics such as margins, customer acquisition cost, and lifetime customer value may support operational efficiency and long-term success.

Growth can be exciting, and financial planning may help ensure that the process is intentional and sustainable.

Estate and Exit Planning for Entrepreneurs

Even if retirement is far off, it might be helpful to begin thinking about what happens to your business if you decide to step away—or if an unexpected event forces a transition. Exit and estate planning may help preserve the value you’ve built and reduce complexity for your family or business partners.

Topics you may wish to explore include:

• Succession planning: Whether you hope to pass your business to a family member, partner, or outside buyer, outlining your preferences in advance can reduce uncertainty.
• Business valuation: Knowing what your business might be worth, and how that value could be enhanced, may help guide investment decisions and exit strategy planning.
• Buy-sell agreements: These legal agreements often outline what happens if an owner dies, becomes disabled, or chooses to exit the business.
• Estate planning considerations: Including your business in your estate documents—such as wills, trusts, and powers of attorney—may help ensure a smoother transition.
• Liquidity planning: Ensuring that assets can be accessed when needed may support both your estate plan and your business continuity goals.

Common Exit Strategies Entrepreneurs May Consider

There are many ways to exit a business, and each comes with financial considerations:

Third-party sale: Selling to another company or investor may offer liquidity and the potential to maximize value, particularly with clean financials and strong operations.

Internal succession: Grooming a family member, partner, or key employee to take over the business may help preserve culture and continuity.

Merger or acquisition: Merging with a complementary business may offer strategic advantages, though it often requires careful integration planning.

Wind-down or liquidation: In some cases, choosing to close the business and sell assets may be the most straightforward option.

Planning ahead can support a more intentional and effective transition—whether the goal is retirement, relocation, or simply a new chapter.

Working With a Financial Professional

Many business owners reach a point where managing personal and business finances becomes time-consuming or overly complex. At that stage, working with a financial advisor or planner may provide value.

You may benefit from outside support if:

• You’re unsure how to align personal savings with business reinvestment goals.
• Your taxes, investments, or insurance needs have grown beyond what you can easily manage alone.
• You’re planning for retirement, a sale, or a business transition and want to explore different scenarios.
• You need someone to help coordinate efforts between your CPA, attorney, and other professionals.

An experienced financial professional may be able to help you create a cohesive strategy that takes your full financial life into account. The goal is not to take decisions out of your hands—but to support those decisions with expertise and structure.

Protecting Business Assets Through Financial Planning

Business owners sometimes focus on growth and revenue at the expense of risk management. However, taking time to evaluate where your business may be vulnerable can support long-term stability.

Here are a few areas that may be worth reviewing:

• Entity structuring: Creating legal separation between your personal and business assets may help shield personal wealth from certain liabilities.
• Contracts and agreements: Reviewing leases, vendor contracts, and customer agreements for potential financial exposure can be a prudent exercise.
• Business continuity planning: Creating a plan for how your business will operate during an emergency, illness, or economic disruption may help reduce downtime.
• Insurance coverage: Ensuring that your insurance aligns with your business’s risks and size may provide added reassurance.

While it’s not possible to eliminate all risk, planning ahead may help you better manage the risks that do exist.

Financial Planning FAQs for Entrepreneurs

What financial documents should I review regularly?
Many business owners find it helpful to review their profit and loss statements, cash flow projections, net worth statements, and tax filings quarterly or annually.

How much should I be saving for taxes?
The percentage varies, but some entrepreneurs aim to set aside 25–35% of net business income. This will depend on your structure and deductions.
Tax Disclaimer: We do not provide tax advice. Please consult your tax professional for guidance on tax savings strategies.

Is it better to reinvest in the business or invest elsewhere?
It depends on your goals, timeframe, and the growth potential of the business. Many choose a blended approach.

What’s the best way to pay myself as a business owner?
You may consider a salary, distributions, or a draw, depending on your business structure and cash flow. A financial advisor can help you weigh the options.

How do I plan for retirement without a traditional 401(k)?
There are several options including SEP IRAs, Solo 401(k)s, SIMPLE IRAs, and Defined Benefit Plans that may work well depending on your income and team size.

Do I need a different estate plan because I own a business?
Often, yes. Including your business in your estate planning documents may help avoid complications later on.

When should I consider selling my business, and how do I prepare for that financially?
Planning a sale 3–5 years ahead of time may offer more flexibility. Preparation often involves financial clean-up, valuation, and reviewing legal agreements.

How much cash should I keep in the business vs. my personal accounts?
A buffer of 3–6 months of expenses is a common goal for both personal and business accounts, but needs vary.

We Offer Financial Planning for Entrepreneurs

At Capital Formation Group, we understand the intersection of personal and business finances. We work with entrepreneurs at every stage—from launching new ventures to preparing for succession—and offer a planning process that reflects your unique goals, values, and risk tolerance.

Our comprehensive approach may help support:

• Personal financial planning and investment strategy
• Business cash flow and budgeting systems
• Retirement planning and benefit selection
• Insurance reviews and risk management
• Succession and estate planning coordination

Whether you’re growing quickly, adjusting your direction, or planning an exit, we’d be happy to explore how our planning services might fit into your vision.

Schedule a complimentary consultation to see how we can support your entrepreneurial journey.

Required Disclosures

The material is for informational purposes only and is not intended provide specific advice or recommendations for any individual, nor does it take into account the particular investment objectives, financial situation, or needs of individual investors. This information is not intended for use as legal or tax advice. Persons should consult with their own legal or tax advisors for specific legal or tax advice. Guarantees are based on the claims paying ability of carrier offering the guarantee.

Securities Offered through Valmark Securities, Inc. Member FINRA, SIPC.

Investment advisory services offered through Valmark Advisers, Inc., an SEC-registered investment advisor.

130 Springside Dr., Suite 300 Akron, Ohio 44333-2431 * 1-800-765-5201

Capital Formation Insurance Agency, Inc. and Capital Formation Group, Inc. are separate entities from Valmark Securities, Inc. and Valmark Advisers, Inc.

Diversification cannot assure a profit or guarantee against a loss.