Anyone who begins a new business must have at least a basic concept of financial planning and ask, “Why is financial planning important in business?” Many people have the idea that financial planning is a complex process that only the rich need to concern themselves with. The simple fact is that everyone needs to construct a sound financial plan and for business owners this is even more important.

Financial planning isn’t just for the rich, it the best way to become rich, says Jonathan D. Pond, financial analyst for PBS´s Nightly Business Report. “People who say they cannot or will not do it are really saying they don’t mind spending their golden years under the golden arches, because that’s what will happen to them.” Pond says that virtually everyone is capable and has the means to become successful. The good news is that financial planning is really easy to do, but the bad news is there is no magic bullet. First you have to save money (and be out of debt), to invest, and the second thing is that you have to know how to invest it.

Sound financial planning is even more important for business owners for some of the following reasons:

• Most business owners are responsible for setting up and tending their own retirement plans. There will come a time when you will want to enjoy a good retirement and, as a business owner, you have no company pension plan, 401(k), or any other of the traditional fail-safe’s to fall back on. Dealing with this is as simple as looking into IRAs or SEP, or setting up a complex Keough 401(k) or investing in a retirement business like network marketing.

• You cannot decide how to invest money unless you have planned to deal with debt, cut expenditures, and save. This means setting goals and sticking to them as well as keeping good records.

• The financial aspect of any business is vital to that businesses survival. Trying to succeed without proper organization and management of your finances can and will cause your business to fail.

• Having a sound financial plan for your business will allow you to estimate profits, project sales and the amount it will cost to run the business. Without this information it will be impossible to keep you business on the correct path to success.

The foundation of any sound business plan is having a mix of different kinds of investments including stocks, bonds and fixed-income vehicles, thereby increasing your invested savings by managing the risk.

Financial planning may seem to be just another “job” on your already overlooked schedule, especially if you are a new business owner. Failing to have a solid financial plan in place, however, will certainly take you from business owner to employee very rapidly.

By: Troy Pryczek