As a business owner, you can expect that your business will go through 3 distinct phases of development. Each phase brings its own success and challenges. If you are aware of these stages and what financial tools apply to each, your business will be better prepared to THRIVE.

I call the first stage “Survival Mode”. In this stage, you are focused on day to day issues. The primary concern is making it to the next week, next month or next year (rightfully so). You typically will have high debt and a low margin for error. Anything that goes wrong…loss of an important client or contract, sickness or injury of the owner or key employee…can have a devastating effect on the bottom line.

You can protect against some of these scenarios using business life and business disability insurance. Life insurance can be purchased as key person coverage or in combination with a buy/sell agreement. The most prevalent employee benefit in this stage of the business lifecycle is medical insurance.

The “Established Business” has established clientele and systems and has a relatively stable cash flow. At this point as the business owner, you typically turn your attention to retaining key employees along with some special benefits for yourself.

Most indicative of the Established Business stage is the qualified retirement plan like 401K, SEP or SIMPLE. In addition, many employers add group life and disability plans. In some cases an executive bonus plan make a great supplement to the retirement plan for you, the business owner.

The owner of a “Mature Business” wakes up one day to realize that she has put all her eggs in one basket – the business. Contrary to conventional wisdom: this is not the best of ideas. While the Mature Business will continue to grow and have healthy cash flow, you the owner have two problems.

1. No liquidity because there is no market for your stock

2. No diversification because you haven’t accumulated assets outside the business.

In the phase, the savvy owner realizes that the business can’t be their retirement (or at least it’s not enough). Your focus shifts to getting dollars from the business balance sheet to the personal side and how to create liquidity. A detailed estate plan is essential at this time. Certain owner benefit’s like deferred compensation and executive bonus may be used to create wealth away from the business.

Where are you in the business lifecycle? Knowing where you are and what financial tools can help you with the problems you encounter is definitely a plus for any entrepreneur, small business owner or professional. Let me help you achieve business and personal financial success.

Joan Gilles is a wealth building strategist to the entrepreneur/small business owner/independent professional; building a bridge to your dreams and peace of mind. She can be reached by email at jmgilles@pressenter.com or through her website at http://www.JoanGillesFinancialCoach.com

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