Small Business Dimensions
FALL 2015
Feast Through Famine
Income planning can help level the ups and downs of cash flow
In this issue:
Of course, your income plan should also include a plan to get out of debt. Why? Because debt can make it harder for your business to succeed. If you have $100,000 worth of debt at 5%, you’re paying your creditors $5,000 a year from your income. It’s also a drag on your personal balance sheet.
Your financial advisor can help incorporate your business’ profits into your comprehensive financial plan. This can include budgeting properly for bills as income comes in; keeping your personal financial goals on track; developing an emergency fund; and building your retirement savings.
Remember, any step you take toward leveling your income stream is a positive step toward your overall success in business.
You have Starting your own business has many advantages. However, one of the drawbacks can be an inconsistent income stream. Yes, you may make your income goal for the year, but when income comes in sporadically, setting and sticking to a budget may be difficult. Plus, in lean times when cash is more a trickle than an actual flow, you’ll likely face the fear that too little for too long may lead to business failure. That’s where income planning, with the help of a knowledgeable advisor, can help.
Step back and take a look
The first step is to plot your cash flow to see where the gaps – or valleys – are. Next, look at your data and answer these questions:
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Do they occur consistently over time or are they sporadic?
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How severe are the short falls?
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Is there a consistent average?
If the gaps are consistent, it will be easier to take steps to plan for them in advance. If they are irregular, knowing the “average” will help you put aside an estimated amount during the flush times. Regardless, the knowledge will help add discipline to your saving and spending.
It can pay dividends
Your financial advisor may be able to recommend investment solutions to address any gaps in income; ideas may include income-generating bonds or dividend-paying equities.* And your portfolio can be structured to provide a “paycheck” based on time increments that make sense for you and your business, be it monthly or quarterly.
*Dividends are not guaranteed and will fluctuate.
Material prepared by Raymond James for use by its financial advisors
The information contained herein has been obtained from sources considered reliable, but we do not guarantee that the foregoing material is accurate or complete.