Business Owners Must Protect Their Futures
If you’re a small-business owner, you think a lot about today. Is your cash flow sufficient … today? Are your products and services competitive … today? Are you confident in your marketing and advertising efforts … today? And because you are so focused on today, you may be neglecting a key aspect of tomorrow – continuity of operations, expansion, selling the company, or transferring to heirs. Bottom line, do you have a good plan for your business and yourself?
Given that your personal finances are so tied up with your business, your plans for the business will obviously greatly affect your financial situation when you want to retire. Whether you want to transfer the business to another family member, sell it outright to someone else, or possibly just wind it down, you’ll need to plan ahead and consult with your legal, tax, and financial advisors.
However, you can take steps now to help ensure you can enjoy a comfortable retirement, and avoid pitfalls by proactive planning. Most businesses have some form of written Business Plan. This document should quantify how you plan to attain your business goals. In addition to not having a business plan problems may be created when a plan is created without conducting a thorough analysis if their situation. The business needs to conduct broad spectrum internal analysis (personnel, business, and corporate structure) and external analysis (benchmarking) and future threat outlook.
In addition to your Business Plan you should create or update a comprehensive Continuity of Operation (COOP) Plan, and Business Exit Plan (BEP).
Your BEP could include passing on to family in a well planned manner to avoid taxes, family and financial issues; to sell it outright; or to have an IPO and sell it off as a publicly traded company. All of these are viable alternatives, but would be much more likely to be successful if planned and in place well advance.
The COOP Plan is more complicated; it needs to cover every eventuality that could impact your business: critical assets, equipment, infrastructure, information, personnel, potential legal liabilities, and insider threats (fraud, theft, or embezzlement). The plan needs to identify the types of threats, time frame, immediate needs, control requirements, emergency requirements, and follow-on requirements. Some considerations include emergency operating capitol to pay employees and overhead, replacement of income/revenue, pay for work lost, to hire coverage and/or contract out work.
“If you fail to plan, you are planning to fail!”
Benjamin Franklin
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“My crown is called content,
a crown that seldom kings enjoy”
William Shakespare
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