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7 surprises to bring a thriving business undone

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You wouldn’t be the first business owner to believe that running a business somehow negates your need for personal financial planning; and that the growing equity in your business equity is the only superannuation plan you need.

You think that because you own a business, your retirement is completely taken care of.  You assume that your business will provide everything.  There is nothing more for you to do!   On all counts, nothing could be further from the truth.

Running a business is no more than a choice you make in how you earn your income.  Some choose business income; some choose employer income.  Either way, those who take a deeper interest in planning their personal and family financial wellbeing will prosper in the long term.

Furthermore, as a business owner there is an extra layer of planning you should be thinking about.  That is, planning the future of your income-earning and capital-appreciating asset, and protecting the equity in business that you work so hard to build up.

There is no guarantee that your business equity will translate into the retirement lump sum you hope for.  There are just a few of the things that could go wrong and derail your dream:

  1. Adverse circumstances (e.g. litigation, legislative change, customer desertion, obsolescence) force you to sell at a bad time
  2. Your health fails you before you reach your ideal ‘sell out & retire’ scenario
  3. Your business partner dies prematurely and his / her spouse becomes your new unwelcome business partner
  4. You want your children to inherit your business but they are not interested
  5. You don’t structure your business correctly to take advantage of the small business rollover rules
  6. You don’t have a Will to control the bequeathing of  your personal assets or your business ownership and / or control
  7. You have no emergency fund and no liquidity available should something major go wrong

Personal planning and business planning aren’t just esoteric concepts.  They are processes that help you predict, protect, or take advantage of the expected and unexpected things that life throws up.

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Why do Business Planning?

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The primary job of a business owner is to manage and run a business. Managing is a lot more than telling people what to do.  It means planning, research, executing strategies, making effective use of available resources and protecting the business.

It is not always the case that a business outcome turns out exactly as planned.  Hence the concept of risk!  Put simply, a business is a risky investment like any other.

Being an entrepreneur involves risk taking.  But that doesn’t mean taking unnecessary risks (e.g. speculative risk).  Part of the business planning process should be about minimizing risk.

If you are investing your life savings, borrowing other people’s money, and putting your family’s stability at risk, it is your responsibility as a startup small business owner to not take stupid risks.

Of course there are unavoidable risks involved in a new business venture. These are calculated risks.  The business planning process may not guarantee success but it certainly decreases the chances of failure.

Your business plan also provides all of the stakeholders in your business, including partners, financiers and employees, with a succinct and unambiguous reference of your intentions and strategies.

Until next time!

Gary