For most business owners, planning and strategizing are second nature. But it's important to remember that using a disciplined approach to creating and executing a plan is the key to thriving in challenging times. That’s where working with a professional financial planner comes in.
Traditionally, the term “resilience” has referred to the ability to weather life’s storms and setbacks. For business owners, financial resilience is the ability to bounce back from events that impact our personal finances.
Our investments, income, and assets can be significantly affected by the death of a spouse or loved one, as well as other big life changes such as divorce, disability, health issues, and unemployment. External events, such as economic fallout from a pandemic, a natural disaster, or economic recession, can also take a toll.
Resilience is about how well we can absorb, respond to, and adjust to these financial shocks.
The good news is, partnering with a Certified Financial Planner professional or Qualified Associate Financial Planner professional can help your business stay financially resilient during challenging times. Together, you can think through the following three aspects of your planning efforts:
Cash Flow – Understanding what’s needed to run the business day to day and month to month isn’t always an issue. Knowing which expenses to cut, on the other hand, both within your business and personally, is crucial.
Emergency Fund – You should keep three to six months worth of cash (depending on the type of business you own) to cover expenses in case of a business slow down or worse. Remember: in an economy-wide shutdown, these funds can be a lifeline, ensuring your business’ survival.
Protection Planning – Businesses tend to be successful based on the owner’s skill and expertise. Having the right insurance coverage can help ensure that the business survives if you find yourself in a position where you can’t control every aspect of it.
If you’re a small business owner, a financial planner can help you create – and maintain – a comprehensive financial plan. Once it’s in place, meeting with them on a regular basis is critical.
Meetings with your planner will ensure that you’re still on target in the face of new challenges facing your business or the market. Talking through any underlying issues can also calm your nerves and fortify your discipline so you don’t make any sudden, detrimental changes.
Finally, don’t forget that knowing when to take a break or some time away from the business can be beneficial. It can provide a different perspective – or just a much-needed break during stressful times.
To find a QAFP® professional or CFP® professional who can help you and your business stay financial resilient, use the Find Your Planner tool.
Iftikhar Mahmood is a Certified Financial Planner professional at CreateWealth Planning in Markham, Ontario.
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