Entrepreneurs, regardless of how successful they ultimately end up being, are people like you and I. Running a business, managing the income streams of your enterprise, maximizing your cash flow, and delivering value to clients and customers clearly are the primary focus of small business owners. That said, something that can, and often does, go overlooked are the personal finances of these very same entrepreneurs. Sure, checking your personal credit statement online might not sound as exciting as prospecting for new clients, but the connection between your finance and your business finance is very real.
While it may seem like these are topics are worlds apart, there are a few parallels and similarities that every small business owner should be aware of.
1. Your credit score can impact your business.
Most everyone knows that monitoring your credit score is important for personal finances, but as a small business owner the state of your personal credit will most certainly impact your businesses ability to borrow. Again, it may seem like these are two separate topics, but in order to finance your business and keep it growing, it's a good idea to monitor these credit scores in parallel. For example, if your personal credit takes a few hits (due to late payments or other items), this may make borrowing for your business more expensive. Those higher interest rates can really add up, and negatively impact your bottom line.
2. Keep your finances separate.
Commingling is something that you might usually hear about it when it comes to real estate transactions or attorney-client situations, but this is just as important for you and your business. It may seem simpler, easier, and more convenient, to keep your business and individual finances in one place, but that can result in both financial and legal headaches down the road. If you are ever sued by a customer, vendor, or business partner, and you keep your finances separate you will be able to respond to these issues in a clear-headed and simple manner. Also, if your finances are not separate, how are you going to get an accurate picture of how your business is actually performing?
3. Make yourself legally separate from your business.
Speaking of legal headaches, one point that cannot be emphasized enough is that you and your business must be separate for legal purposes. You can still name your business after yourself and all of that, but to protect your personal finances and assets it is recommended to keep yourself and your business legally separate. This applies to both how your operate your business, and your insurance coverage -- you never want your personal assets and income to be at risk due to possible problems with your business. If you are not legally separate, business problems and issues can put your personal finances at risk.
4. Protect both your identities.
You may have your personal finances and business finances separate, have your appropriate legal and accounting structures in place, but you aren't done yet. With the Equifax hack still echoing in the media, investing in some data security and insurance is a smart move both as an individual and small business owner. Just like you wouldn't want someone spending money on your personal credit cards, you definitely don't want hackers gaining access to your business capital, or customer information.
5. Use the resources available to you.
Like I said before, there are a lot of business resources and information related to small business finance and entrepreneurship, but it is important to make sure you take full advantage of unbiased information. Whether you are doing your own research online, or hiring experts (like CPAs and attorneys), make sure that the focus is on you and your business success. The simple truth is that better informed people make better decisions, and finance is no exception.
As an entrepreneur, you are definitely going to focus on topics like business finance, business development, client retention, and managing your social media presence, but you must remember that your personal finances will influence your business success. Taking into account the implications of your credit score, legal ramifications of running your own small business, and the constant specter of potential data hacks may seem like a lot to handle all at once. That said, getting started today and consistently making these topics priorities will help you improve both of your finances in less time than you might think.