Failing to Plan

“What is the best use of my time right now?” The famous question posed by author Alan Lakein, and the related response, “goal setting and planning,” captures the essence nicely. 

For the typical business owner, “planning” brings to mind income-tax planning, or perhaps sales planning, or even budget planning. While all of these are important, there is more to the picture. Much more.

It is, of course, quite common to spend a significant amount of time focusing on the day-to-day needs of your enterprise. Covering cash-flow needs, ensuring product delivery, and securing new business are vital activities. These important endeavors often leave little time for planning in the larger context.

Whether you call it risk assessment, succession planning, enterprise risk management, or good old common sense, the list of activities could seem endless and therefore not achievable. So let’s start with just a few A-list items. 

The unexpected exit 
Starting your business may have been the result of long-term planning or an “ah-ha” moment where resource and opportunity collided. Whatever case, an exit strategy may well not have been part of the picture. It is not too late. Take a look at the potential reality of death, disability, or other unexpected exit circumstances and figure out how you would like things to play out. A solid buy-sell agreement, coupled in many cases with key-executive insurance, to fund buy-out and business continuance is a must.

Desire to share the wealth 
Perhaps (and often a foundation of succession planning) there is an interest in bringing in business “partners.” These partners come in many shapes and sizes, some offering financing, and others bringing business-development acumen. By defining needs and drawing agreements on how the business will operate with the addition of new members, you stand a much better chance of a harmonious relationship for the long term. Always know how to get out of a business situation when you get in. Exit arrangements generally fall into two categories: cross-purchase or redemption. The right type depends on your circumstances.

Succession equals sale
Perhaps you are just ready to dispose of your business, or someone is knocking on your door with an offer that is too good to pass up? The best way to be prepared for either circumstance is to have a clear understanding of what your enterprise is worth. How do you accomplish this? Business valuation is the answer. Business brokers may offer input and you can contact an individual certified in business valuation, one who specializes in determining value, to become well-informed and realistic about your expectations.

Wealth management
Your business is likely a significant aspect of your personal wealth. Understanding value (read: business valuation), liquidity or marketability, and the potential tax effect of disposal of your business is critical to making good decisions. Opportunities, or sometimes needs, can come up quickly. So be prepared.

The other stuff 
Make a list. It is that easy. Sit down for 45 minutes and assemble a list of the items that keep you up at night, or you heard someone talking about at the gym, or saw in the business section, and give yourself a place to start as you continue your planning journey. To get you started, consider some of the following: insurance review, retirement-plan review, comprehensive retirement plan, budgeting (business and personal), investment diversification, wills, trusts, and health-care proxies.

In Lakein’s words, failing to plan is planning to fail. Avoid becoming part of that story and contact your CPA today; he or she is an invaluable resource as you plan to protect the future of your business and family.        

Gail Kinsella is a partner in the accounting firm of Testone, Marshall & Discenza, LLP. Contact Kinsella at gkinsella@tmdcpas.com