By Clay Elliott, CFP®, AWMA®

Louisiana offers a vibrant business climate with its distinct fusion of industry, culture, and natural beauty. But just like any other enterprise, Louisiana’s small businesses deal with a variety of challenges, such as shifting regulations, natural disasters, and economic ups and downs. To successfully manage these complexities and pursue long-term profitability, professional small business financial planning is crucial. 

In this article, I share the importance of small business financial planning, highlighting critical strategies that can help businesses in this beautiful state.

Understanding Financial Planning for Small Business Owners

Let’s start with a summary of small business financial planning.

Financial planning for small business owners provides a clear road map for financial objectives, controlling risks, and making well-informed decisions. It should include these components:

• Retirement planning
• Insurance considerations
• Investment strategies
• Succession planning and exit strategies

To verify these factors are addressed and to pursue long-term prosperity with confidence, a solid financial plan is paramount.

Retirement Planning 

For small business owners, retirement planning is wise in order to help manage finances later in life. Unlike employees who can typically access employer-sponsored retirement plans, small business owners should pursue a more proactive strategy that includes these key considerations:

• Retirement savings options: Explore various retirement savings options like Individual Retirement Accounts (IRAs), Simplified Employee Pensions (SEPs), and solo 401(k) plans depending on the structure of your business. 
• Business structure impact: Corporations and LLCs can provide greater flexibility and possible tax deductions for retirement savings, while sole proprietors and partners typically have fewer options.
• Special considerations for Louisiana small business owners: Risks from hurricanes and floods can require additional insurance coverage and disaster preparedness strategies. It’s also critical to understand the unique tax ramifications of retirement savings in Louisiana. 
• Succession strategy: Create a strategy for selling the company to fund your retirement or for transferring ownership.

Insurance Considerations

Louisiana presents unique insurance needs for small business owners due to its distinct geographic location and potential for natural disasters. Here’s a summary of key considerations:

• Business insurance: Property, general liability, professional liability, workers’ compensation, and commercial auto.
• Health insurance: Affordable Care Act (ACA), Small Business Health Options Program (SHOP), and self-insured health plans.
• Insurance in a comprehensive financial plan: Risk management, insurance cost budgeting, tax implications, and legal compliance.

Investment Strategies 

Small business owners often have distinct investment needs outside of their core business. Investment diversification can reduce risk and possibly yield better returns.

One of the strategies I recommend is to diversify investments that go beyond your business. These investments can include:

• Retirement accounts: Explore various retirement savings options like Individual Retirement Accounts (IRAs), Simplified Employee Pensions (SEPs), and solo 401(k) plans depending on the structure of your business.
• Real estate: Purchasing real estate can mitigate tax liability and provide rental income.
• Stocks and bonds: Investing in bonds and stocks has the opportunity for growth and diversification. Bonds are essentially loans to governments or firms, while stocks represent ownership in companies.

Another strategy I often advise is balancing your personal and business investments. This can be accomplished by the following steps:

• Financial goals: Establish both short- and long-term goals to help you make informed investing choices.
• Risk tolerance: Evaluate your risk tolerance to identify suitable investing strategies.
• Professional advice: To create a customized investment plan, speak with a financial advisor.

Succession Planning

Professional succession planning entails creating a thorough strategy to transfer ownership, keep the company running, potentially safeguard the owner’s and the company’s financial interests, and allow the owner to leave a lasting legacy.

I consider the following factors to be the most important:

Giving to Family vs. Selling

• Selling: Getting an outside buyer for the company might yield a substantial financial return, but it also requires careful negotiation and appraisal.
• Giving to family: Keeping control within the family can be done by transferring ownership to family members, but estate planning and family dynamics must be carefully considered.

Hiring a Professional CFP® or CEPA® Exit Planner

• Knowledge: CEPA® and CFP® professionals have specialized knowledge in business exit strategies and financial planning. At Oak Capital Private Wealth, we provide the knowledge of both designations to our clients – Claire Elliott, CEPA® and Clay Elliott, CFP®.
• Objectivity: They can assist in negotiating favorable terms and offer an objective viewpoint.
• Guidance: They can help the owner navigate the intricate succession planning procedure.

Hiring a Financial Advisor in Your Area

• Familiarity: A local advisor is likely more knowledgeable about economic conditions and the local market.
• Networking: They can connect the seller with potential buyers.
• Personalized advice: A Louisiana-based advisor can offer customized advice (local knowledge, regulations, etc.).

We’re Here to Help

You want to shepherd your small business to long-term prosperity. But doing it alone is an enormous challenge.

At Oak Capital Private Wealth, we have extensive knowledge and experience in all facets of small business financial planning. We hold ourselves to the fiduciary standard, which means we always act in our clients’ best interests. Our reliable, responsive team provides comprehensive financial planning in a family-friendly environment. 

If you’re ready to learn more, we invite you to schedule a meeting by calling 225-416-7373 or emailing [email protected].

About Clay

Clay Elliott is Owner, Principal, and Financial Advisor at Oak Capital Private Wealth, a financial services firm based in Port Allen, LA, dedicated to providing local financial advice held to the highest standards. Since becoming a financial advisor in 2016, Clay prides himself on working toward his clients’ best interests. He provides comprehensive financial planning and educates his clients to develop robust wealth management strategies to help them pursue their financial goals. He loves helping people pursue financial independence and strives to help them live out their financial plan successfully.

Clay holds a bachelor’s degree in marketing from Louisiana State University and is a CERTIFIED FINANCIAL PLANNER®. He is also an Accredited Asset Management Specialist, Chartered Retirement Planning Counselor, and Accredited Wealth Management Advisor.

Outside of work, Clay enjoys spending time with his wife, Claire, and daughter, Camille, playing tennis, fishing, and attending LSU sporting events. An active participant in his community, Clay is involved with The Emerge Foundation Center for Autism, is a board member of the West Baton Rouge Chamber and Port Allen Rotary Club, and is the president elect for the Louisiana Chapter of the Financial Planning Association. He was also named Young Professional of the Year by the West Baton Rouge Chamber of Commerce. To learn more about Clay, connect with him on LinkedIn.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. 

This material is intended to assist in educating you about insurance generally and not to provide personal service. Guarantees are based on the claims paying ability of the issuing company. All investing involves risk including loss of principal. No strategy assures success or protects against loss. Securities offered through LPL Financial. Member FINRA/SIPC. Investment advisory services offered through NewEdge Advisors, LLC, a registered investment adviser. NewEdge Advisors, LLC and Oak Capital Private Wealth are separate entities from LPL Financial.