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Entrepreneurs: Six Steps to Build Financial Freedom while Growing your Business

Photo of author, David McKinley, CFP®.
David McKinley, CFP®
President and Chief Investment Officer

Financial success often results from the ability to effectively run your business and implement a long-term, personal financial strategy.

The primary goal for an entrepreneur should be to take as much control of his personal finances as possible.

An entrepreneur’s drive to grow his/her business and/or develop professionally often exceeds the diligence needed in his personal investing. Building your financial freedom while growing your business can be as simple as following these steps.

Step 1: Keep your personal finances separate from your business finances.

Early in a business venture, it is difficult to draw a distinct line between your business and personal expenses. For example, meeting payroll in the early years may mean forgoing a paycheck yourself in order to continue building the business. However, understanding your current financial situation for both your business and your personal life will enable you to define clear objectives for your money.

Financial independence is achieved by managing your personal wealth with the same tenacity as your business. In order to achieve personal wealth, you must first spend less than you earn. Oftentimes we run our businesses with effective cost controls in place, reducing the amount of unnecessary expenses in order to increase profitability. The same principle is often overlooked in our personal lives. A well-structured financial plan can help guide our savings and investments to help us achieve personal profitability to meet or exceed our needs and objectives.

Step 2: Select a financial advisor that will help you develop a comprehensive financial plan for your business and personal objectives.


Entrepreneurs are faced with many decisions to make each day. We surround ourselves with competent and loyal professionals to help operate our business, with the intent of creating an effective team. Engaging a financial planning professional should be no different. As a part of your team, they should provide objective and comprehensive advice for your needs and objectives.

When choosing an advisor, consider their experience, investment management approach and compensation platform in your selection process. Take the time to understand the fees associated with your advisor-client relationship.

Fee-only advisors are not compensated for or otherwise motivated to execute transactions that may not be in your best interest. They do not receive any commissions on particular products. They are required to provide unbiased investment management strategies tailored for each investor. When professional advisers have a fiduciary duty to their clients, they must put the client’s interests ahead of their own.

Your financial advisor will help you build long-term diversified portfolios that generate the rate of return you need to help you reach your individual goals. A CERTIFIED FINANCIAL PLANNERtm professional can prepare a structured financial plan to help you meet your financial objectives. After five, ten or 20 years when your financial concerns change, this advisor can work with you to modify your plan to help insure that your financial goals are met. Meeting on a regular basis will foster communication so you are better prepared to face a major financial decision for your business or personal situation.

Step 3: Diversify your investment portfolio while maintaining a level of liquidity for new business opportunities.

Quite simply, business ownership = equity = risk.

A diversified portfolio, especially in times of stock market or business volatility, takes on added importance for achieving your long-term financial goals. Having a consistent approach to investing requires that your portfolio is diversified into different asset classes and not simply comprised of just one asset class, i.e. stocks.

How much weight should be given to each asset class depends on the level of risk you are willing to take and your targeted rate of return. The investment mix that meets your objectives today may not be appropriate in the future. Thus, it is important to review your portfolio’s asset allocation each year to make sure it reflects your needs and objectives. A diversified portfolio positioned for your long-term financial goals works to provide growth opportunities for your future even during periods of market volatility.

While it is important to diversify your investments, entrepreneurs also need the ability to access money from other sources. As new business opportunities arise, you will need to maintain a certain level of liquidity for investment.

Step 4: Maintain the proper insurance coverage for your family and business in order to protect your success.

Entrepreneurs do not plan for failure because in their minds, it is not an option. For this reason alone, seeking qualified advisors for guidance on maintaining adequate insurance coverage will provide a more objective perspective on protecting the financial future of your business and family.

Conduct a risk analysis of your business. Work with insurance professionals who have experience with your type of business and are experienced in identifying your insurance needs. They can help you determine the value of your growing assets to make sure you have adequate coverage in the event of loss.

Review various types of policies, paying close attention to property, automobile, liability, malpractice, business income, equipment and disability insurance. Evaluate your policies each year as your revenue, inventory and employees change.

Finally, maintain the right amount of life insurance coverage in order to protect your family and those depending on your income. Determining the right amount of coverage depends on many factors, including your health, your ability to save money and your financial situation. Work carefully with an insurance professional to evaluate your options. Step 5: Create a pool of personal liquidity.

An entrepreneur’s innate passion for success, matched equally by their tolerance for risk, motivates them to work hard every day to grow a successful business. Many business owners look at their business as their retirement. Unfortunately, many companies are not prepared to prosper without the principal or owner actively managing the business. Therefore, planning ahead for your financial independence requires you to have an exit strategy in mind.

Retirement is often a part of your future plans; not the present. Yet, old age is as certain as the need to financially plan for a comfortable retirement. A comfortable retirement means different things to different people. Some people envision a leisurely retirement as a time to tour the world, visiting other countries and experiencing different cultures. Others see it as an opportunity to take up new hobbies or spend more time with family members. Whatever your retirement dreams, you’ll need a well‑conceived financial plan to help you reach them.

It is never too early to begin saving for retirement, and taking advantage of your employer’s retirement savings plan as soon as possible will give your account the maximum amount of time and potential to grow. If you start your own business, you will have to assume responsibility for previously employer-sponsored benefits. It is important to maintain retirement, medical, and life insurance plans as you continue building financial security.

Saving a fixed amount each month early in your career enables you to achieve your long-term goals more readily. It’s a simple “pay yourself first” philosophy, after all, you’re successfully growing your business and you should be able to enjoy the fruits of your labor down the road.

Step 6: Continue to redefine your purpose as your business grows.

What's Your Plan with Local Search Marketing wording on Sky Background,.jpeg

Flexibility and vision are two core qualities of today’s entrepreneur. While growing your business, you strive to remain open to new ventures, redefine your products and services to the changing needs of the consumer and maintain a pioneering vision for the future growth of your organization.

As entrepreneurs, we strive everyday to be successful. But success is not just attained through the generation of significant wealth, but through the understanding of the purpose for such wealth. How will your wealth be distributed in your estate? Do you intend to help support a charitable mission or leave a financial legacy for your children? What do you plan to experience during your retirement years? Understanding where our financial freedom is leading us enables us to work even harder toward those objectives.

Your business plan is in place. Now is the time to have an effective financial plan to grow, protect, and distribute the fruits of your labor.

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