For nearly 5,500 years, human beings have written things down. From Hammurabi’s Code and the U.S. Constitution to your personal business plans, writing things down helps people follow rules and best practices, and pursue goals and action items. However, many successful business owners don’t have any written plans they can follow to help them achieve the future for their ownership that they most desire.
“I’ll start when I’m ready,” “This business can’t ever run without me,” and “I’d like to exit but I don’t know what I’d do” are just a few of the most common reasons that business owners don’t create written plans for the future of their businesses and their ownership. Ironically, written plans can offer solutions to these arguments. Let’s look at how.
Written Plans Help You and Your Business Get Ready
One of the most common refrains among business owners when talking about future business transitions is “I’ll start planning when I’m ready to go.” However, by the time many owners are ready, it’s often too late for them to exit on their terms.
One of the most important aspects of a successful business transfer or transition is achieving financial security (i.e., exiting the business and never having to work again unless you choose to). In fact, if you don’t achieve financial security as you transition out of the business, that business exit is a failure. But how can you know how much you’ll need to achieve this lofty goal?
The answer lies in writing things down. Accounting for what you have and comparing it to what you’ll need is much easier when you can see it on paper (or on a screen). When owners start writing things down (with help from their professionals on their advisor team), many discover a gap between what they have and what they need for financial security.
When owners can see that gap, it’s no longer a problem that exists in a distant, theoretical future. Even the most successful business owners can face this gap, despite all of their business success. Since you’re likely to rely on your business to fill in any gaps, seeing the gap in written form can shatter illusions about what you must do to achieve financial security, and how long it might take.
In short, written plans can show you that even if you’re ready to exit, the business may not be ready. That can give you time to start planning for how your business and personal situations will interact as you try to reach your goals.
Written Plans Support Accountability
When you write things down, you and your advisor team or management team can review your plans more regularly and see where things are dragging or going off track. For example, writing down who is responsible for which action items to position the company for a successful future ownership transition gives detail and timeline expectations to those involved.
Written Plans Can Uncover Values-Based Goals
Written plans are rarely static. As you meet milestones and free up your time, you might find that certain values-based goals become important to you. For example, as your company becomes less reliant on you, you may find that providing your family more chances to travel the world is more of a priority than it had been in the past.
Written Plans May Help Your Family
Finally, a written plan may reduce the likelihood of arguments after you die. Putting your wants and wishes in writing provides your family, employees, and advisors guidance on what to do with everything you have after you die. For many owners, strong legacies and minimal infighting are important. Without a written plan, it can be much harder for the people you care about to carry out your wishes.
We strive to help business owners identify and prioritize their objectives with respect to their business, their employees, and their family. If you are ready to talk about your goals for the future and get insights into how you might achieve those goals, we’d be happy to sit down and talk with you. Please feel free to contact us at your convenience.
The information contained in this article is general in nature and is not legal, tax or financial advice. For information regarding your particular situation, contact an attorney or a tax or financial professional. The information in this newsletter is provided with the understanding that it does not render legal, accounting, tax or financial advice. In specific cases, clients should consult their legal, accounting, tax or financial professional. This article is not intended to give advice or to represent our firm as being qualified to give advice in all areas of professional services. Exit Planning is a discipline that typically requires the collaboration of multiple professional advisors. To the extent that our firm does not have the expertise required on a particular matter, we will always work closely with you to help you gain access to the resources and professional advice that you need.
This is published by Business Enterprise Institute, Inc., and presented to you by our firm. Any examples provided are hypothetical and for illustrative purposes only. Examples include fictitious names and do not represent any particular person or entity.