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Unexpected financial crisis that a small business may face………….

It’s hard to foresee all the expenses that a small business will face; but there are several that I seldom see addressed.

An owner of a small business is the business and anything that affects the owner will also impact the business. In doing a budget for a small business, it’s not enough to look at all the regular business expenses and to add a contingency fund for unexpected business expenses. It’s equally important to do a personal budget for the business owner and to add unexpected expenses to that budget.

Unexpected family expenses should be examined in the initial budget preparation. A recent client came to me with financial problems which first occurred in his personal life and then carried over to the business. In this case, the parents had a financial set back and the business owner (child) felt he had to help. The money he is currently giving to his parents is the money that was needed to run and grow the business.

Other issues that I have come across are grown children needing help as well as uncovered medical bills.

No, it’s very seldom possible to have all your financial bases covered before you start a business. I like to prepare my clients before a business is started to at least be aware of potential negative financial situations and to examine possible alternative solutions.

Once a business is in operation and financial setbacks occur the choices are to either borrow working capital, decrease expenses or, my favorite, increase the bottom line.

Unexpected expenses also tend to work as a “demoralization factor” and enthusiasm and activity slows down. I find that it is almost always possible to put on an “increase the bottom line blitz”. This blitz also serves to energize the business and the business discovers ways to be more productive and efficient in its marketing and internal product/service delivery process. A plan and an accountability to that plan are the key factors when we work in a “turnaround situation”.

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Many small business owners give up and close their businesses without ever trying to overcome the obstacles.  Don’t ever give up until you examine the positive alternatives.

Nick J. Petra CFP

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