By Jennifer Farnsworth
The best advice Paul Dowen, a managing partner of Whittemore, Dowen and Ricciardelli, LLP in Queensbury, can give to business owners is pretty simple: Have cash.
Dowen said the number one thing he tells small business owners, or those looking to open a small business is have enough cash in a reserve.
“I tell people just starting up—hoard your cash, be prepared,” said Dowen.
Dowen said when starting a business, people should not be undercapitalized. They need to figure out how quickly cash can be generated. He recommended having enough cash to live on for three months, so that until a person can be solvent before collecting the first paycheck as a small business owner.
“If you don’t have that, then it is best to wait on the startup,”said Dowen.
For current business owners, he gives similar advice. He warns against purchasing things that won’t help generate a cash flow. Most banks are happy to finance equipment for small business owners, especially items that will enhance the business and generate more equity.
Dowen also advises to have a business plan in writing to serve as a guide to short- and long-term goals. It should be a clear plan that addresses sources of income and the demographics of target customers. Businesses need to know who they are marketing to, because it will greatly affect cash flow.
“That is how you will grow and make money. Ninety five percent of businesses fail because of cash flow,” said Dowen.
Dowen recommended using marketing tools like social media to tap into potential customers. Once that research is done, look to find ways to finance the business. Save as much as possible and make sure the venture can afford to lose money if things don’t go as planned.
“We aren’t trying to discourage people from starting up a business we just want them to avoid putting hardship on their family,” said Dowen.
For those who have been in business for a while, he recommended revisiting their plan, making sure they are meeting their goals. Purchase only what generates cash.
“If it doesn’t make you money, wait on it, “ said Dowen.
Dowen said another thing more small business are doing is looking at hiring contractors or freelancers to do the work, as opposed to hiring part- or full-time employees. His firm uses a 12-point test that helps determine which option is more cost effective. It often depends on the line of work.
Dan Hazewski Jr. of Legacy Planning Partners in Glens Falls said the biggest news in small business financial planning is the new Department of Labor 312 Fiduciary Rule.
A 312 investment adviser is a co-fiduciary role, where an adviser provides advice to an employer regarding 401k investment, and the employer retains the discretion to accept or reject the advice. Hazewski said the plan is something that most business owners already have in place with their sponsors, but as of June 9, it will be a requirement.
“What is does is supply choices for businesses, as well as monitoring. While it is something that many already do, it really is a huge change in the industry,” he said.
Hazewski added that the plan will act as a way to monitor how a small business works with their sponsors, which he said is important during these uncertain times.
Hazewski said when he meets with people looking to open, or even maintain a small business, he always sticks to what he called “tried and true” advice.
“Stay in constant communication with your advisors and stay up to date,” he said.