The answers to these questions will help you determine the financial success your company could achieve.
By: Kurt A. Schindler*
Your business is the principal asset that will allow you to achieve financial independence. That’s why the finances and profitability of your business are important considerations in your financial plan. Answering the questions of why you own a business and what is your end goal for your business will help you determine how successful it may be.
Why do you own a business?
Maybe you created a business because you were passionate about a specific subject, it was part of your education, you saw a growth opportunity in the market, it is part of an inheritance or your parents asked you to carry on the tradition of the family business. Each of these reasons is valid. What is important is to recognize if you still own the business today for the same reason and remember why you created it. I recommend you write down this reason in your business plan book and read it frequently.
What is the goal of your business?
The answer to this question will allow you, as the owner, to determine if you are managing your business in line with your vision for it. For example, maybe you created the business to earn income to let you support your family. Or maybe you developed it as a part-time business to earn extra money in addition to what you earn in your full-time job. Another possibility is you created it with the plan to grow the business.
In other cases, owners decide to manage the business for a certain amount of time with the intention of selling it later. If you establish a business with the goal of maximizing the sale price, you will run it with that perspective in mind, regardless of whether you sell it in five or 20 years.
If the business increases in value, such as those in the manufacturing industry, the owner may reinvest profits because the investment will be recovered during the sale.
How to establish your pay
As part of your working plan, you should plan your finances and establish the salary you will earn and how often you will be paid (weekly, every two weeks, or monthly). To determine this amount, it is important to know the minimum amount of money you need to meet your financial responsibilities.
It is important not to lose perspective of why and what for you own a business. Even so a little help never hurt anyone. I invite you to visit www.popular.com/en/business for useful information about businesses. Also, you could share your contact information and one of our experts will get in touch with you.
*Kurt A. Schindler is the director of Financial Education for Banco Popular de Puerto Rico. Schindler is a Certified Financial Planner® and has a Ph.D. in Personal Financial Planning from Kansas State University. The American Bankers Association recently honored Schindler with the George Bailey Service Award, which is given to bank employees who are not chief executive officers (CEO) and who demonstrate excellent initiative by doing high impact work and serving as an inspiration for others. It is the only prize given by the ABA to an individual as part of its Community Commitment Awards.