Small Business Financial Management
Once you have automated your financial system (see previous posts), manage your business finances. You need to periodically rebalance investments and revise your strategy based on actual performance and evolving needs. Your income must be stable, predictable, and payable in cash while not being diminished by charges, management or redemption fees. To be in alignment with your target asset allocations and goals your capital must produce income, be safe, and liquidable while not being diminished by unnecessary commissions or expenses. The investment must produce without any further involvement or expense on your part. Must not require frequent maintenance or geographic presence and is protected from ‘acts of God’.
When you’re over a million in revenue and there’s more complexity find a fee-only financial advisor. A commission or percentage based advisor at even a 1% fee will eat away your returns.
Questions to Ask a Financial Advisor - Are you a registered investment advisor, a fiduciary? - Are you or your firm associated with a broker dealer? - Does your firm offer proprietary mutual funds or separately managed accounts? - Do you or your firm receive any third-party compensation for recommending particular investments? - What’s your investment philosophy? - What financial services do you offer beyond investment strategy and portfolio management? - Where will my money be held?
If the answer to questions 1-4 is a yes, the advisor may steer you to specific investments. Be leery of advisors that believe in active management or that they can beat the market. As your needs evolve you may need an advisor that specializes- e.g. business transitions, estate management. Your money should be held with a third-party custodian, then signed to manage without withdrawing.
A fiduciary financial advisor is licensed with the the United States Securities and Exchange Commission (SEC) or state regulators and is not permitted to receive payments that create a conflict of interest unless they comply with certain conditions of exemption that minimize the effects of a conflict. Be mindful of the unless and monitor for any potential bias or conflict.
FIRE = Financial Independence, Retire Early
Lean or Fat = luxury during retirement
Know these terms to recognize them when referenced, but we are going to challenge the value of these concepts in future posts. Early retirement should not be the goal as much as the ability to take mini retirements now and throughout your career. The quality of that retirement should be closely connected to things that add meaning to your life not consumerism.
Thank you for reading, Beyond Business: Musing from a socially conscious international small business.