According to the LIMRA International Small Business Owners Report, on average, 45% of a business owner’s net worth is related to his/her business. Juxtaposed against this statistic from the same report, only 26% of small businesses have a succession plan in place, it is evident that far too many companies are lacking a strategic business plan. This is true even though many closely-held and family business owners do want to pass on the business to the “next generation.” While larger companies are much more likely to have a sound business and succession plan in place, even in the big and middle-market category, planning is not always what it should be. The following checklist provides some important business planning caveats and guidelines to follow in creating a plan, regardless of an organization’s size.
- Seek out the advice and guidance of an experienced strategic business planner. Do not rely solely on the input of the company’s management team and trusted advisors although their input will be vital to the plan’s development, implementation and success.
- When developing the plan, the owner should take the time to ask and answer pertinent questions relating to his/her personal situation and goals (e.g., When would you like to retire? In retirement, do you want to remain involved? Do you want to sell the company at some point? Do you have buyer in mind? Will a buyer be easy to identify? Are their special family circumstances that need to be addressed in this business planning? Do you want a family member to succeed you in the operation and/or ownership of the company? Is there a key employee(s) whose role and/or equity position must be considered? What is the value of the business?)
- The strategic business plan should clearly define: the owners/shareholders’ goals for the company, as well as business’ goals, and the related strategies and action items for achieving those goals.
- The strategic business plan should present the business’ current value and market value should a sale be initiated.
- The strategic business plan should identify potential risks to the company and how those risks will be managed and mitigated (e.g., risk management measures, insurance, technology solutions, specific marketing and sales initiatives, etc.).
- The strategic business plan should include funding vehicles to provide liquidity in the event of a death, disability or retirement that affects the company’s finances.
- The strategic business plan should incorporate policies and procedures for monitoring and updating the plan to accommodate the evolving business and ownership goals.