The company owner is not an employee

Why personal business finances cannot be dealt with like all others

One of the most common mistakes I face in my practice is the attempt to approach the personal finances of an entrepreneur in the same way as the finances of employees.

At first sight, it can make sense, pleasure, expense, booking, investment, money like money.

But the reality of the owner of the company is completely different. And who doesn't understand this, sooner or later, because the owner of the company is not just a person with income. He is a carrier of business risk, responsibility, strategic decisions and very often the main pillar of the company. That is why his financial strategy of the entrepreneur must be built differently from the normal financial planning of the employee.

Personal and corporate risk cannot be separated by a line

The line between personal and occupational finances is relatively clear. Payout will come. Or not. The risk is borne by the employer. For the entrepreneur, this line is virtually not existed. the company's results directly affect its personal pleasures. At the same time, its health status, mental condition or family situation have a direct impact on the functioning of the companies.

If a key employee gets sick, the company usually does. If the owner gets sick, the whole business often stops.

This is why it must be part of the personal financial strategy as well as risk management and well-adjusted business insurance, not just business insurance, but specific income protection of key persons. Without this, financial planning of entrepreneurs is not complete.

The business family carries more risk than it admits.

The business family is more dependent on the company than they often realize.

The income for the employee is relatively stable and predictable.

Nevertheless, I often encounter this:

• family finances are not separate from corporate
• The personal reserve does not exist because there is something in the company.
• relies on the company to always help

But that's an extremely risky assumption.

At the moment when the ban falls, the cash flow fails or the crisis in the industry, the family does not have a protective cushion Mortgages and current spending does not wait.

This is why the key point is:

• clearly separated personal finances of the entrepreneur
• personal reserve outside the company
• quality liability insurance and company property insurance
• protection of the owner's income

That's not too careful. That's professional risk management.

Typical mistakes that repeat over and over again.

In years of working with the owners of the companies, I see the same patterns:

• no personal income protection
• No clearly separated personal reserve
• all savings from parking at the company
• zero diversification of assets
• reliance on future sales of the company without a specific exit strategy
• underestimation of the impact of a long-term illness or disability

Company owners are used to taking risks, and it's often how they succeeded.

But the same approach applied to personal finances and family security can be destructive.

The company can take the risk. The family can't.

Dividends, profit and exit are not planned. They are scenarios

Another fundamental difference from employees is working with irregular income:

• dividendy
• extraordinary profit payments
• future exit

Many entrepreneurs have their entire pension scheme built on the idea that one day they will sell the company.

However, a responsible financial strategy for an entrepreneur does not build on a single scenario.

It counts on:

• the value of the company can vary significantly
• sales may not come out at the scheduled time
• exit may not be immediately liquid

Therefore, it is crucial to build personal property even outside the company and to work systematically to diversify the property.

What is the personal financial strategy of the company owner

Functional financial planning of entrepreneurs is based on several principles:

1) Department of Personal and Corporate Finance

A personal reserve outside the company is the basis of stability.

2) Protection of the owner's income

Not just company insurance, but business insurance as key persons.

(3) Active risk management

Management of corporate risks, liability insurance and protection of corporate assets.

4) Diverzifikace majetku

Not everything in the firm, not everything in one field, not everything in one scenario.

5) Realistic work with the future

Exit strategy is a possibility, not a certainty. Financial independence is not an age, but a state.

Such a strategy does not arise from universal production. it comes from an understanding of business, family situation, cash flow and risk rates.

Conclusion

The owner of the company is not an employee. And his personal finances deserve the same level of strategic thinking as he gives to his business.

The real financial planning of the entrepreneur links personal finance, business insurance, risk management and long-term work with property.

And it's here that shows the difference between a regular financial advisor and a partner who understands business.