Getting your finances in order: a primer

Entrepreneur’s most common mistake is not having a plan Getting the right professional advice can also be essential

“ You got a business that’s working? You’re going to sell it someday,” says Grant Robinson, a Fellow Certified Accountant and director of Robinson & Company LLP’s SuccessCare program.

Preparing for the inevitable at the beginning of a small business life cycle allows entrepreneurs to face unexpected decisions with every possible option. As important as it is to a business owner’s personal finances that his or her business does well, it’s equally important that their own personal finances are in order. Here’s a primer.

The corporate is personal: The most common mistake entrepreneurs make is to not have a business or personal plan, says Jila Mott, a Fellow Certified General Accountant, insurance broker and financial adviser with Keybase Investments Inc. Most people need both, along with a reminder to be realistic.

Ensuring you have adequate start- up funds means you won’t need to draw a salary before your business can afford it.

“ Most of the time [ small business owners] shouldn’t touch any money from their business for the first six months to a year,” says Mott. “They need working capital there.” ‰ The right advice: Mott says her pet peeve is with entrepreneurs who don’t pay an accountant at the beginning of their financial planning.

“ They think ‘ I need the money to invest in the business’ and so on, but [ an accountant] is money well spent,” she said. Good advice centres on people around you, says Jim Rapino, chief executive of Vubiz, an online education business based in Mississauga.

“ The people you want around you are a good banker, an accountant, a lawyer who understands corporate small business and an insurance broker.” Once you’ve found them, Rapino suggests educating yourself as much as possible to streamline the process by knowing exactly what to ask. The first step in establishing this group is to find experts in small businesses and interview them as you would any employee. Ask about clients and references.

Starting on the right foot: The easiest way to separate business and personal finances is by incorporating, which will protect personal assets, protect investments made into the business, ease a future sale and limit taxes. It also offers more choices with income, such as splitting between salary and dividends. An unincorporated business will still benefit from an accountant organizing tax breaks from business related-expenses, as well as paying family members. ‰ Investments: Once your business begins to make enough for you to draw a salary, it’s important to keep personal investments in balance. Entrepreneurs naturally lean toward investing heavily in their own companies, something experts support only after years as a start-up when profits are returned to the company.

If most of your money is in your business, the rest should be placed in safe investments. ‰ Think long-term: Some of the most important things a business owner can do are intangible, says Robinson, especially in a family business. Everyone involved should feel included. For Robinson, this involved sitting down with his six partners — all with children in their 20s — and creating a family participation plan.

Often, answers to problems can be as simple as asking for help and looking for mentors. Groups like the Canadian Federation of Independent Business ( www. cfib. ca), or the Canadian Association of Family Enterprise ( www. cafemembers. can help entrepreneurs learn from their peers.