Financial Tips I Wish I Knew When I Started My Business – Smart Strategies for Small Business Owners
When I first started my business, I’ll be honest—I didn’t know half of what I know now about managing money, building wealth, or even saving on taxes.
I wish someone had sat me down and explained some of these basics because, let’s face it, none of this stuff is taught in school.
So, if you’re a small business owner, especially here in the UK, I want to share some things I’ve learned along the way.
It’s not official financial advice—I’m not a financial advisor—but it’s some friendly guidance on where to start, what to look into, and how to set yourself up for a more secure future.
1. Generating Income Through Your Own Business
First off, if you’re running your own business, you’re already on the right track when it comes to taking control of your income.
But one of the biggest mistakes I see small business owners make is not working closely with an accountant.
I’m not talking about just doing your yearly tax return; I’m talking about really diving into what expenses you can claim and how to structure your finances to keep more money in your pocket.
Working with an accountant is as much about planning for your business and personal future finances as it is about dealing with past historic records, filing taxes, and preparing VAT returns.
A good accountant helps you understand where your money is going, how to maximise your profits, and what you need to do to achieve both your short-term and long-term financial goals. They’re not just there to crunch numbers; they’re there to help you strategise and plan ahead.
If your business has a turnover of over £1/2 million, I highly recommend speaking to my trusted accountant and tax specialist, Matt Russell of Woods Russell Accountants.
Matt has been invaluable in helping businesses reduce their tax bills and ensuring that owners get the best returns for their hard work. He knows the ins and outs of tax planning and can help you navigate the complexities of the tax system to make sure you’re not paying more than you need to.
For example, did you know you can claim a lot of your home office costs, travel expenses, and even some meals as business expenses? Every pound you save on taxes is a pound you can put back into your business—or into your pocket.
My accountant has been a game-changer for me in that regard, and I can’t recommend enough that you find one who understands the ins and outs of small business.
It’s one of the smartest moves you can make.
2. Make the Most of ISAs and Junior ISAs
Next, let’s talk about saving and investing tax-free with ISAs. This is one of those things I wish someone had told me about sooner.
An Individual Savings Account (ISA) lets you save or invest up to £20,000 per year without paying any tax on the interest, dividends, or capital gains. That’s a huge opportunity to grow your wealth without the taxman taking a cut.
And if you’re a parent, Junior ISAs are a fantastic way to start saving for your child’s future. You can put up to £9,000 per year into a Junior ISA, and it grows tax-free until they turn 18. It’s like setting them up with a financial head start.
I’ve personally found the Wealthify app to be a really easy way to start a Junior ISA for my daughter. The platform is user-friendly, and it allows you to invest in a diversified portfolio based on your risk preference.
Over the last year, the Junior ISA I set up through Wealthify has seen returns of over 10%. It’s an excellent tool for anyone looking to get started with investing for their kids’ futures without needing to be a financial expert. The app also provides regular updates and performance reviews, which makes it easy to stay on top of how your investments are doing.
Let’s say you decide to start putting just £100 a month into an ISA. Over 20 years, assuming an average annual return of 5%, you could end up with over £40,000. And that’s without any tax to worry about on the growth! This just shows how even small, regular contributions can build up significantly over time, especially when you start early. The magic of compound interest works best when you give it time to do its thing.
Now, let’s talk about broader investments.
One of the best pieces of advice I got was to look at the performance of the S&P 500 over its lifetime. Historically, the S&P 500 has averaged about a 10% return annually, though, of course, past performance doesn’t guarantee future results.
The point is, by spreading your investments across different companies or even different sectors, you reduce your risk. This is why having multiple income streams or methods of growing your wealth is so important.
You don’t want all your eggs in one basket, whether that’s just in your business, in cash savings, or in a single stock.
3. Start Your Pension Journey
Now, here’s something I didn’t pay nearly enough attention to when I started out—pensions.
And I’m not alone; very few small business owners, especially those in trades or creative industries, have a proper pension set up. But let me tell you, starting a pension is one of the smartest things you can do for your future. And these days, it’s so easy.
Platforms like Penfold, Nest, and PensionBee make it incredibly simple to set up and manage a pension. You don’t need to be a financial wizard to use them.
Take Penfold for example—it’s tailored for freelancers, contractors, and small business owners. You can manage it all from an app on your phone, set up regular contributions, or just add money whenever you can. They even help you find and consolidate old pensions, which is a great way to keep everything in one place.
Then there’s PensionBee, another excellent option. They make it easy to combine all your old pensions into a single plan. Plus, they offer various investment options, including socially responsible ones, so you can invest in line with your values. The app lets you track your balance and contributions on the go, making it really convenient.
And let’s not forget Nest, a government-backed scheme that’s ideal if you want to start offering pensions to your employees or just for yourself. It’s low-cost and straightforward—perfect if you’re just starting out with pensions.
The point is, setting up a pension doesn’t have to be complicated. And with these platforms, you can start small and scale up as your business grows.
Plus, there’s some great tax relief on contributions, which means the government is effectively giving you free money to save for your future!
4. Investing Beyond Pensions: Stocks and Shares ISAs, Dividend Stocks, Premium Bonds, and More
Once you’ve got your pension sorted, it’s time to think about other ways to grow your wealth.
Stocks and Shares ISAs are a great place to start. They allow you to invest in a variety of assets—like stocks, bonds, and funds—all while keeping your gains tax-free. It’s a smart way to potentially earn more than what you’d get from a standard savings account.
To get started with stocks and shares, I personally use the Freetrade app. It gives me access to a range of UK, European, and USA shares, bonds, and ETFs. This is where I access the iShares S&P 500 (GSPX) and the Vanguard FTSE All World (VWRL) funds.
The iShares S&P 500 is a great way to invest in the top 500 companies in the US, spreading your risk across a wide range of sectors. The Vanguard FTSE All World is even broader, covering companies from around the globe.
Freetrade’s platform is easy to use, and it’s a great way to see how different industry sectors are performing worldwide, which can be helpful when you’re prospecting or thinking about where to focus your marketing efforts.
Another investment strategy worth considering is dividend stocks. These are stocks from companies that pay out a portion of their earnings to shareholders, usually on a regular basis. It’s a great strategy if you’re looking to earn a steady income from your investments, which you can then reinvest to grow your portfolio further. Some top-performing UK dividend stocks include Unilever, GlaxoSmithKline, and British American Tobacco. Dividend stocks offer the potential for both income and growth, making them a versatile option for investors looking to diversify their portfolios.
If you’re looking for a more conservative option, Premium Bonds are an interesting choice. While they don’t pay interest, you get the chance to win tax-free prizes every month. It’s not a guaranteed return, but your initial investment is secure since it’s backed by the government.
5. Exploring Alternative Investments: Social Investing, Crowdfunding, and Angel Investing
Now, let’s talk about something a bit different—alternative investments.
These are opportunities that go beyond traditional savings and investments, and I’ve found them to be not only financially rewarding but personally fulfilling too.
Social Investing: One of the things I’m passionate about is investing in community energy schemes. I’ve used some of my spare cash to support projects that help schools and community groups benefit from low-cost energy.
It’s a win-win; you get to support a great cause that aligns with your values, and in return, you often receive a modest return on your investment. It’s a way to grow your money while making a positive impact, and it just feels good to know you’re helping local communities thrive.
Reading Hydro was one excellent renewable engineering project near me, that was community driven. MaidEnergy is another local project I’ve been able to support.
Crowdfunding: I’ll admit, I also like to have a little flutter when I have some spare money. Crowdfunding platforms like Crowdfunder, GoFundMe and Kickstarter, let me check out other entrepreneurs’ ideas, which is exciting. It’s like a window into the future, seeing what innovative solutions people are coming up with and supporting the entrepreneur community.
Plus, it’s a great way to diversify where your money is going—some of these ideas really take off, and it’s rewarding to be part of their journey from the start. Crowdfunding is also a fantastic way to stay connected to the entrepreneurial spirit, allowing you to see which new ideas are gaining traction and could potentially disrupt markets. It’s both a learning experience and a way to contribute to the growth of new businesses.
Angel Investing: If you’re interested in getting even more involved, angel investing might be for you. This involves providing capital to startups in exchange for equity. It’s not for everyone, as it requires significant capital and a high risk tolerance, but it can be incredibly rewarding both financially and personally if you’re passionate about supporting new businesses.
The returns can be high, but so are the risks, so it’s important to only invest what you can afford to lose and to thoroughly research each opportunity. Remember, these alternative investments can offer higher returns, but they come with higher risks.
They’re not covered by the Financial Services Compensation Scheme (FSCS), so do your homework and only invest what you’re comfortable with.
Websites worth a look include Seedrs (now Republic Europe) and Angel Investment Network.
6. Save Time and Money: Work with a Financial Advisor
Let’s be honest—trying to figure out all these financial strategies on your own can be overwhelming.
It takes time, and there’s a lot of trial and error involved.
You might end up making some costly mistakes along the way, just like I did.
Looking back, I wish someone had told me that the most sensible and profitable approach is to work with a financial advisor.
A financial advisor can help you cut through the noise and focus on what’s really going to put more money in your pocket.
They bring expertise and experience that you just can’t get from reading a few articles online or watching YouTube videos. It’s about making smart decisions that align with your personal and business goals from the get-go, not figuring it all out after years of muddling through.
If I had known all of this when I started my first business at 14, I can’t even begin to imagine how much further ahead I’d be today.
Having someone guide me on the importance of ISAs, pensions, diversified investments, and cash flow modelling could have significantly boosted my personal wealth and helped me avoid some of the costly mistakes I made early on.
This brings me to my wealth advisor, Sam Miah, a partner at St James’s Place and the brains behind Berkshire Financial Planning. One of the most valuable things Sam does is cash flow modelling. It’s like having a roadmap for your financial future, showing you how and when you’ll need cash—from sending kids to private school, paying for university, buying a holiday home, or planning your retirement travel.
Think of it this way: Just like a business coach helps you understand your business cash flow and plan for growth, Sam helps you understand your personal financial flow. Knowing when you’ll need money and planning for it can help you reach your financial goals quicker. It’s all about understanding the big picture and making informed decisions along the way.
Sam’s approach is incredibly thorough.
He starts by helping you map out your entire financial landscape—everything from current expenses to future needs. Then, using advanced cash flow modelling, he can show you different scenarios based on various factors, like changes in income, inflation, and unexpected expenses. This isn’t just about managing money; it’s about achieving peace of mind and knowing that you’re on the right path to meet your financial goals.
I can’t recommend speaking to Sam enough. If you’re looking to get serious about your financial future, give him a call and tell him I sent you. He’s fantastic at breaking down complex financial concepts into simple, actionable steps.
And here’s the next step: Once you’ve had a conversation with Sam and have a clear picture of when you’ll need money in life and how much, it’s time to make sure your business can deliver. That’s where working with a business specialist like myself comes in.
Together, we can create a business strategy that brings in consistent customers and profit, aligning your business growth with your personal financial goals. Let’s build a business that not only supports your lifestyle but also allows you to achieve all those personal milestones you’ve mapped out.
Ready to take the next step? Let’s chat about how we can make that happen.
Final Thoughts: Take Charge of Your Financial Future
Look, I know this stuff can seem overwhelming, but it’s really about taking small steps that add up over time.
Whether it’s setting up a pension, investing in an ISA, or just getting a handle on your expenses, every bit of knowledge you gain and every action you take moves you closer to financial freedom.
Remember, this isn’t about becoming a financial expert overnight.
It’s about arming yourself with the knowledge you need to make smarter decisions. And when in doubt, don’t hesitate to seek professional advice. Whether it’s from an accountant, a financial advisor like Sam, or even a business coach, getting expert guidance can make all the difference.
Take the first step today—whether it’s setting up a meeting with a financial advisor, opening an ISA, or simply reviewing your business expenses. The sooner you start, the sooner you’ll see the benefits. And remember, every decision you make today can have a significant impact on your financial future.
Let’s take control of our finances and build a secure and enjoyable future.
