Women and (Their Own) Business

Starting and growing a business brings unique challenges. For many entrepreneurs, the main focus is keeping things ticking over for now and the immediate future. The planning required to ensure that the business will be a source of wealth over the long term can take time and effort. For women-owned businesses, there is an additional level of complexity as women’s financial journeys follow a different trajectory.

Businesses tend to have three sequential stages:

  • Launch
  • Growth
  • Succession or exit

Each phase has specific challenges, and there are ways to help maximize success. Financial planning to keep the business growing and build long-term wealth can also be tailored to each stage.

Leaving the Launchpad and Achieving a Trajectory

Not surprisingly, cash flow is the biggest challenge in the initial stage. For many women, this means starting up a business while continuing full or part-time paid work for others. This can be a valuable source of cash flow, but the goal is to focus solely on your business as soon as possible. This is where budgeting comes in.

You’ll need to set realistic budgets for your business and personal life and keep them separate. These budgets have different goals. On the personal side, you want to keep expenses to a minimum so the money you save can be redeployed to the business. One caveat – it’s important to maintain your own physical and mental health, so don’t cut too deeply on expenses that help you stay balanced and healthy.

On the business side, you want to set a budget that allows for necessary spending and sets you up to grow. It’s important not to skimp on tools, supplies, space, advertising, etc. that your fledgling business will need to get off the ground.

Maintaining your emergency fund for your personal expenses is next. You’ll need to think about how transitioning to income provided by your new business will impact your emergency fund. Is your business seasonal or cyclical? Will the cash flow be “lumpy,” meaning you’ll go long periods with nothing and then have large amounts of money come in? You may need to increase your emergency fund to be sure you are covered if you are likely to go through longer periods when cash flow from the business is lower.

Finally, even if you aren’t ready to borrow money for your business yet, start the process by tuning up your credit and keeping it in great shape. Paying on time and paying down balances both have an immediate positive impact on your credit score. Creating a relationship history with a local bank can be helpful later on. It’s very easy to get paid through an internet payment process platform, but it’s a good idea not to keep the funds there. You want to be routinely moving money into your business bank account.

How can financial planning help at this stage? Setting up the right structure for your business can save you considerably in taxes. For most small businesses, a sole proprietorship may be the most efficient. But creating a limited liability corporation (LLC) or an “S” corporation to pass through income and avoid double taxation of income at both the business and personal level can also be beneficial.

Even though your business is young, the advantages to a business owner of taking a multi-year approach to tax planning are significant. Understanding what is available in terms of both tax credits (reductions in the amount of money you owe) and tax deductions (decreases to the amount of taxable income). Both are extremely valuable to business owners and having a plan to maximize them makes a difference in the amount of money you keep.

That brings us to “pay yourself first.” This refers to continuing to make long-term savings a priority. As a business owner, you may have more options for contributing to a retirement plan, including if your spouse is employed by the business.

Growing and Expanding on Your Terms

The expansion stage of your business is exciting. You’ve achieved proof-of-concept, you have a business financial history, and you know your market. At this stage, taking on debt to fuel growth is often the next step. This could be debt in the form of a loan or a mortgage on real estate.

Either way, there will be tax implications, and you’ll want to be sure you are maximizing any tax benefits.

Another route to expansion is taking on a partner. This can bring in capital as well as talent, but it needs to be structured carefully to protect you, your partner, and your families. You’ll need the proper agreements and insurance in place to ensure the business can continue if anything happens to either partner.

As your business grows and you hire more employees, you may also consider employee benefits. Attracting and retaining top talent is important to your business growth plans and stability. Retirement plans for employees can help with that, and setting up the right plan as an owner can also help you save more for retirement.

What’s Your Exit Plan?

No matter how much you love the business you’ve created, having an eye on your end game well before you get there is critical.

Whether you produce a product or provide a service, you need to be thoughtful about the full value of your business. Do you need to stay involved in some capacity? If you intend to sell your business, you’ll want to have an eye toward maximizing profits to increase the value of the business. If your goal is a succession plan with a family member, you may prioritize minimizing debt to keep the business in shape for a new generation.

Thinking about eventually leaving the business you’ve built may be difficult, but because it is your biggest asset, you may need to monetize the business so you can successfully move into the retirement stage of your life.

Understanding what you want your retirement to look like is the first step. A financial advisor can help you build a plan by considering all your assets and then helping you work to ensure that the business will provide the income you want throughout your entire retirement.

Women tend to have longer retirements than men. Because they live longer, they may also need more care in the last decade or so of life. This translates to needing more income for longer. If you are funding your retirement with your business, you want a plan that provides the income you need in the most tax-efficient way possible.

The Bottom Line

Building a business can be incredibly rewarding across multiple dimensions. But it requires planning to ensure that the business will create lasting wealth for yourself and your family.


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The information contained herein is intended to be used for educational purposes only and is not exhaustive. Diversification and/or any strategy that may be discussed does not guarantee against investment losses but are intended to help manage risk and return. If applicable, historical discussions and/or opinions are not predictive of future events. The content is presented in good faith and has been drawn from sources believed to be reliable. The content is not intended to be legal, tax or financial advice. Please consult a legal, tax or financial professional for information specific to your individual situation.

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