Owning a successful business is a constant exercise in planning. Many successful business owners have already engaged in personal financial planning, including investing and providing financial security for themselves and their families.
However, fewer business owners have created a business continuity plan. A business continuity plan includes strategies and action items regarding what happens to the business if or when you are no longer available to manage it (by choice, death, or otherwise).
The lack of a business continuity plan can interfere with your personal financial planning. On the other hand, creating a business continuity plan can often complement your personal financial planning. Let’s look at a few ways your business continuity planning could be linked to your personal financial planning.
Continuity and personal finance are not mutually exclusive
Many business owners and their families rely on the continued success of the business to support their lifestyle. But the success of a business does not come from nowhere. It’s probably taken you years to grow your business to the point where it’s bringing you consistent income and supporting the lifestyle you and your family want.
Unfortunately, all of your hard work can be quickly undone if you die, become disabled, or face more common issues that can affect your business ownership (eg, divorce, bankruptcy) without a plan. This is especially true if the business relies primarily on you, your leadership, or your business relationships for its success. If you are absent, business performance can begin to decline rapidly.
However, with a solid business continuity plan, you can begin to protect your personal financial situation from unforeseen events. For example, a business continuity plan can provide guidance to your family, business, and business partners on what to do with the business if you were to leave it unexpectedly. You can describe how executive functions, critical relationships, or essential business activities should continue without you.
Such planning can also help you articulate your personal financial goals more clearly. When you create a plan that provides instructions for the business to continue without you, it can also help you focus on how much your personal financial security depends on your business.
You can then approach your personal financial planning in two contexts, with and without the business, to give you a more complete picture of the steps you may need to take to achieve your personal financial goals.
Other benefits of the business continuity plan
A business continuity plan can also help you play the offense in your planning. A critical aspect of business continuity planning is establishing a chain of command to resolve business issues if you can no longer run the business. This means that following good continuity planning, you are likely to install or further develop a strong management team.
A strong management team is one of the most important drivers of value (if not the most important) for your business. When a business runs well independent of the presence of the owner, it can make that business more valuable than a business that is heavily dependent on the owner. This can lead to more lucrative deals if you ever decide to sell your business.
Even if you never intend to leave, a business continuity plan that emphasizes a strong management team can have a positive impact on your personal finances throughout your ownership.
Strong management teams can elevate the business beyond what only you can do. It can increase the reach and profitability of your business. This, in turn, can help you create bigger streams of income for you and your family. It can also give you more time and freedom to do other things that interest you since you can leave the business in the hands of your management team with confidence.
Take advantage of the connection
A solid business continuity plan can complement your personal financial plan. It can protect your business against unforeseen events that could harm your personal finances. He can provide advice to those you love the most if you ever left the company suddenly. And it can create more value for your business while giving you more time and resources to pursue your financial and values-based goals.
We strive to help business owners identify and prioritize their goals as they relate to their business, their employees and their families. If you’re ready to talk about your goals for the future and find out how you might achieve those goals, we’d be happy to sit down and chat with you. Do not hesitate to contact us at your convenience.
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As a member of the Business Enterprise Institute (BEI), Cornerstone Business Advisors is an authorized distributor of BEI’s exit planning content and tools.
The Cornerstone team includes former C-level executives, successful entrepreneurs and advisors who offer unparalleled experience in delivering advanced, personalized and results-driven solutions for business leaders. As a member of the Business Enterprise Institute (BEI), Cornerstone is an authorized distributor of BEI content and exit planning tools. We developed the Performance Culture System™ to help clients implement best practices and drive high performance across their organization. For more information, visit www.launchgrowexit.com, call (910) 681-1420, or email [email protected]