How to Achieve Financial Freedom as a Small Business Owner?

Unless you are taking over a family business where you watched your parents toil away their whole lives, you started out with bigger dreams. Dreams of building your own wealth, buying a home, and maybe even spending the last 40 or so years of your life drinking margaritas on the beach.

Then, about five years in, you forget that was ever a dream. Especially if you are a young business owner watching the current financial market. You may wonder if you will ever even get out of debt, let alone finding time to so much as dip a toe in the sand.

Despite the despair you may feel in the moment, there are ways to achieve financial freedom even when you have committed to owning a small business that is not turning out to provide the lifestyle you had imagined. Obviously, you know what hard work and dedication feel like since you have poured sweat (and maybe tears) into your business. Hopefully you know what creating a plan feels like, too. If you know how to do these things, you can put together a financial plan that will help you achieve the freedom you are looking for.

Step One: Spell it Out

Sometimes we just need to be very specific about what we want in order to get the ball rolling. So, the first thing you need to do is define what financial freedom means to you. For most people, being debt-free is the starting point, but then what? Do you want the basics like owning a home, not worrying about the bills, and having enough money saved for retirement and emergencies? Or do you want something more extravagant like rarely having to come into the office, frequent golf outings, and world travel?

Whatever your goals are, they are likely possible if you create and follow a careful plan, stay flexible, and are willing to do the work and make the sacrifices necessary to get yourself there. Take some time to create an honest list of financial goals. Don’t shortchange yourself and be honest about what you want.

Step Two: Figure Out Where You Are Right Now

This is the part that will probably hurt a little (maybe a lot), and it is going to take quite a bit of time if your business is complex. Many entrepreneurs have their finances so wrapped up in their businesses that unraveling the money can be quite an adventure. You’ve got to do this step and do it thoroughly, though, before you can even begin to work on real financial freedom.

Figure out where every dime of your money goes, and keep a separate ledger for your personal and business expenses. Take everything into account including payroll, utilities, insurances, taxes, retirement matching, everything. 

Step 3: Start Paying Yourself First

How much money do you want to save? Make sure that money gets put away every pay cycle before anything else gets paid. Of course, you are obligated to pay your employees and contractors, but you get the point. If you put this money away first thing, then you can work on finding the funding for everything else that has to be paid. If you do not, then you likely won’t find the money to save and you will end up only with what is leftover—which is usually nothing as a business owner.

Step 4: Find Places to Streamline Your Finances

The point of step 3 was to force you to do step 4. As a small business owner, there is probably a lot of waste you have not found the time to address. Maybe you could be saving money on insurance, or maybe you aren’t taking advantage of every available tax break. It is also possible that the waste is coming in the form of lack of productivity. Are there things you could outsource to save yourself time so you can get more work done? Are there ways you can help your employees be more productive? 

No one is asking you to act like Ebeneezer Scrooge and deny your office even one lump of coal to stay warm, but there are probably ways you could be saving hundreds if not thousands of dollars if you just look at ways to streamline your finances at the office and at home. This article offers 50 excellent suggestions for saving money in your business.

Step 5: Use the Money You Save to Pay Off Your Bills

As a small business owner, you likely have debt, but you need to get yourself out of paying those bills as quickly as possible. You will save yourself loads of money in interest if you can just get your credit card bills paid off, so do that as quickly as you can.

Step 6: Generate More Income

You probably do not have time to generate active income by getting a side gig or another job, so the first place to look for ways to generate more money is obviously going to be within your business. Are there ways you can expand your products and services to create more revenue? What would it take to create and meet new marketing goals? 

If it doesn’t seem viable to expand your business right now, then you could try generating forms of passive income through opening an online dropshipping store or even through affiliate marketing. These don’t require much if any cash up front, and the larger time investment to get set up is the majority of the effort required.

Step 7: Plan For The Future

Now that your bills are paid off and you are generating enough money to save, it is time to create a succession plan for your business and talk to a financial advisor who can help you figure out exactly what you need in order to live the life you want well after retirement. Congratulations! You are well on your way to financial freedom!

Ryan Kh

Ryan Kahn, known as a career coach and television personality. Ryan Kahn is founder of The Hired Group, author of Hired!