By Rich Best

There’s no denying that business owners have a greater opportunity to earn a great living and build wealth more than most people. However, they also face several challenges, such as the initial startup costs of time and money to build their business. Their ability to generate income from their business is their most valuable asset, but it must quickly be converted into capital that can be accumulated and preserved if they are to achieve financial independence within a shorter time horizon. Without a comprehensive financial plan to guide them in their financial decision, even high-earning business owners can fall well short of that goal.

Now, more than ever, business owners need a fully integrated financial plan, managed through a collaborative effort by a team of advisors. The financial planning process, guided by your goals, needs, priorities, and attitude about risk, should coordinate all of the financial disciplines, including wealth accumulation, risk management, asset protection, wealth distribution, tax planning, estate planning and charitable planning, with customized strategies for each.

The Essential Components of the Business Owner’s Financial Plan

Clearly defined financial goals. Your entire financial plan springs from your goals. If financial independence is your goal, you need to define what that looks like and what it means, quantify it, and set it to milestones; otherwise, there is no way to know if you’re on the right track, or on track at all.

A retirement strategy integrated with other priorities. Business owners want to be able to do it all – build a thriving business while providing for a good life now and in the future. The biggest mistake most people make, however, is to plan for these goals independent of ensuring their financial independence. The retirement strategy should focus on both the accumulation of capital and the distribution of capital for creating lifetime sufficiency.

A comprehensive risk management plan to protect family and assets against all contingencies, including a disability, the death of a breadwinner, professional and personal liabilities, and catastrophic losses. The plan should be funded maximum coverage for each risk using quality insurance products. Business owners should carry excess personal liability coverage through an umbrella policy.

A long-term investment plan utilizing an asset allocation strategy customized to their investment objectives and risk tolerance. A well-diversified, global portfolio of equities should anchor the strategy for the best opportunity to achieve steady, long-term growth. Business owners must diversify beyond their biggest asset, which is typically their business.

A tax reduction strategy utilizing provisions of the tax code to minimize the impact of taxation to the greatest extent possible on income and investment returns.

An exit strategy is a must for any business owner with aspirations of one day leaving the business to family members or selling it for maximum value. Defining the timing, the terms and the transition of exiting the business is critical in order to achieve a successful outcome.

An estate plan to preserve assets, lower estate settlement costs and provide for a smooth transition to family members. Special attention should be given to legal protections during incapacitation – i.e., Power of Attorney, Medical Directive, Living Will.

Finally, a comprehensive financial plan requires a process to implement, monitor, evaluate and adjust as business owners move through their life and career stages. If for no other reason, this is why business owners need to work with a high quality, independent financial advisor – one who works with other advisors to be able to create a comprehensive plan and to coordinate its full implementation. A good financial advisor can also be a financial coach, helping business owners to stay disciplined, stay on course and to avoid the financial and investment traps that snare a lot of people.


Rich Best has spent 28 years in the financial services industry, as an advisor, a managing partner, director of training and marketing, and now as a consultant to the industry. Rich has written extensively on a broad range of personal finance topics and is published on several top financial sites.

The information provided is presented for general informational purposes only and does not constitute tax, legal or business advice. Any views expressed in this article may not necessarily be those of Nevada State Bank.