Owning a business is exciting at times, frustrating at others, but always demanding. There are so many decisions to make on a daily basis, and often, as a business owner, you not only have to make the decisions, but must also roll up your sleeves to make those decisions bear fruit. One decision you should make early as a business owner is determining who will be your trusted advisors to guide you through the legal and accounting issues your business will encounter. Selecting a professional to assist you with legal and accounting decisions is vital to launching and maintaining a viable enterprise, because decisions made early in the formation of a business can have far reaching consequences down the road.
In my practice, I often see clients who chose to handle matters without engaging attorneys and accountants early in the process, and later failed to recognize issues as they arose during the day-to-day operations of the business. Those decisions can cost business owners far more money down the road than hiring the appropriate professionals in the beginning, and can have a significant effect on the ultimate success or failure of the business. I have found those mistakes fall into seven basic categories. This is Pitfall number 2 of 7 common pitfalls I see businesses owners make. Over the next few weeks, I will be sharing all 7 of these pitfalls and proven ways to prevent them.
Pitfall # 2 – Failure to Plan
Business Plan – Every company needs a business plan. The business plan should consider the market for the product or services offered by the company, the costs to develop, market and sell the product or services, the relative cash flow needs to operate the business, how the company will be capitalized, and what net profits can be expected by running the business. Often business owners have a great idea and jump into business without having a plan in place. A business plan also needs to be revisited from time to time to evaluate how an ongoing business is meeting its objectives. An accountant is a great resource for helping a company develop a business plan and financial models around that business plan.
Strategic Plan – Every business also needs a strategic plan. The strategic plan differs from the business plan. A business plan examines the cost of doing business so a company can be prepared financially to sustain its operations, and make money for the owners. A strategic plan, on the other hand, is aspirational. It is a set of goals the owner wants to accomplish for the business, and can include employee compensation and benefits, enhancing the customer experience, developing a new product or introducing a new service, or expanding existing operations. Every business should be in tune with its industry and looking ahead five years to plan for the future of the company. Trade publications, industry blogs, conferences, and continuing education or training programs are great ways to stay in tune with an industry and pick up on the clues to assist the company with planning for a sound future for the business.
Succession Plan – We all want to leave something meaningful and lasting behind for posterity. Most of us have a will and do some personal estate planning so our loved ones will be provided for after we are gone, but more often than not business owners fail to take the same care in planning for the future of their company. Business owners should not neglect the process of deciding the future leadership of the company. Every business should have a plan in place to address what happens with the ownership and management of the company when the current owners and officers leave the company. It is important to train individuals to assume responsibilities of top management and carefully plan who the future owners of the company will be to ensure a smooth transition without business disruption in the event of a death, resignation, or retirement. A good business and estate planning attorney can assist a business owner with making sure the long term goals for the business carry on in the hands of those most qualified to run the business, and that the business is owned by those individuals the business owners desire to succeed them as owners.
About the Author
Ashley focuses her practice on Outside General Counsel Services and Business Bankruptcy and Creditor’s Rights Practice Areas. She is an effective, results-driven advocate for her clients. Her background of 30 years in business bankruptcies, distressed debt workouts, problem loan recovery, and real estate title and commercial litigation provides her with a solid foundation of general business, accounting and legal skills.