The Importance Of Financial Planning When Developing A Business Portfolio
There are over 1.7 million small businesses in the country employing more than 5 million people. These small businesses are in addition to the thousands of larger corporations with over 500 employees each. Small businesses account for nearly 25 percent of total exports and contribute significantly to the economy. The 51 percent of these businesses that survive for more than five years do so because of good financial planning and an effective business portfolio. Developing a successful business portfolio is not easy. There are several reasons why it is helpful to use the services of a professional planner when building a long-term portfolio.
One of the most effective ways that professional financial planning will help any business portfolio is through the competent and knowledgeable handling of taxes. Taxes are a complex area that requires specialized training and experience to understand fully. A business that plans correctly for taxes will be able to achieve much larger growth for a longer period of time than what is available to average consumers. There are certain investments and vehicles that will allow for tax-deferred growth and even tax-free capital spending when parts of the portfolio mature.
A financial planner will help a business by creating a broad and diverse portfolio. Some business owners who attempt to assemble a portfolio tend to stick to a small subset of investments because of familiarity or because of bad advice. Planning with the assistance of a professional will give a business access to complex instruments like exchange-traded funds or other items that are frequently beyond the scope of people outside of the industry. A properly diversified portfolio will withstand the markets over time and provide businesses with a firm and consistent valuation.
One of the most important results of good financial planning when it comes to a business portfolio is protection. Protection means that no single market activity, global event or business decision will destroy the portfolio. This is especially important after years of successful planning when the amount of money invested becomes significant and risk increases. This includes changing investments when necessary and using the tools that are available to provide insurance for the business.
The simple goal of planning a long-term strategy for a business portfolio goes beyond raising revenue and value. It needs to be targeted to match the eventual objectives of the business. This can include capital investments and even retirement for owners of a small business. A good portfolio will use a series of different strategies to maximize the returns each year while simultaneously providing new investment opportunities as they become available. This can fuel growth over many years when executed successfully.
Something that financial planners will always consider is the availability and liquidity of the funds in any business portfolio. Although it is impossible to have a fully liquid portfolio, maintaining a certain amount of available funds each year is very helpful when confronted with emergencies or other unexpected expenditures. Using laddering techniques, leverage and other options will provide a greater amount of choice each year. This also works to lower any losses that might occur over time as the markets shift and different investment options become less profitable.
One of the most effective ways that professional financial planning will help any business portfolio is through the competent and knowledgeable handling of taxes. Taxes are a complex area that requires specialized training and experience to understand fully. A business that plans correctly for taxes will be able to achieve much larger growth for a longer period of time than what is available to average consumers. There are certain investments and vehicles that will allow for tax-deferred growth and even tax-free capital spending when parts of the portfolio mature.
A financial planner will help a business by creating a broad and diverse portfolio. Some business owners who attempt to assemble a portfolio tend to stick to a small subset of investments because of familiarity or because of bad advice. Planning with the assistance of a professional will give a business access to complex instruments like exchange-traded funds or other items that are frequently beyond the scope of people outside of the industry. A properly diversified portfolio will withstand the markets over time and provide businesses with a firm and consistent valuation.
One of the most important results of good financial planning when it comes to a business portfolio is protection. Protection means that no single market activity, global event or business decision will destroy the portfolio. This is especially important after years of successful planning when the amount of money invested becomes significant and risk increases. This includes changing investments when necessary and using the tools that are available to provide insurance for the business.
The simple goal of planning a long-term strategy for a business portfolio goes beyond raising revenue and value. It needs to be targeted to match the eventual objectives of the business. This can include capital investments and even retirement for owners of a small business. A good portfolio will use a series of different strategies to maximize the returns each year while simultaneously providing new investment opportunities as they become available. This can fuel growth over many years when executed successfully.
Something that financial planners will always consider is the availability and liquidity of the funds in any business portfolio. Although it is impossible to have a fully liquid portfolio, maintaining a certain amount of available funds each year is very helpful when confronted with emergencies or other unexpected expenditures. Using laddering techniques, leverage and other options will provide a greater amount of choice each year. This also works to lower any losses that might occur over time as the markets shift and different investment options become less profitable.
