Six Questions For A Clear-Eyed Look At Your Business

Running a business effectively, seeing it grow (or shrink), can be a time-consuming process, so I don’t blame you for little mistakes you may have made along the way.

But mistakes made out of improper planning — well, I can’t let those happen to you and sit idly by.

So, in that spirit, I’ve identified six major mistakes made by local business owners.

“A business absolutely devoted to service will have only one worry about profits. They will be embarrassingly large.” – Henry Ford

When you’ve seen the “unexpected” strike so many businesses over the years (as I have), you tend to see certain optimistic New Year’s projections made by entrepreneurs with a bit of a jaundiced eye.

I’d hate to see you get burned.

Which is why I’m about to raise some issues to you, and ask you some questions. It’s a bit of a different approach than I normally take in my blog, but if you take it seriously … it can be a transformative process.

Take a look at each of these questions, and if you are troubled by any of your answers — send me an email … and again, if it’s not something we’re equipped to handle, we can equip you with a good advisor.

#1: Is the value of your business firmly established?
Questions to consider
* Have I ever had my business value appraised by an outside party?
* Do I have a formal buy/sell agreement in place?
* Is my buy/sell agreement funded?
* Does my buy/sell agreement adequately protect my heirs, my business, and my partners?
* Has this agreement been reviewed in the last 3 years?

If you have any plans to someday extricate yourself from your business (and you should ALWAYS consider your exit strategy), these are critical questions.

#2: Is there an emergency plan?
Questions to consider
* Do I have a will, and is it up to date with my business wishes?
* Do I have a plan to retain key employees if something were to happen to me?
* Are my assets protected from potential litigation?
* Have I identified and written down my trusted advisors?

Unless you plan to forever cheat death, a business owner would be foolish to not prepare for that event.

#3: What is to happen next?
Questions to consider
* Do I have a formal succession plan prepared and on file?
* Does my succession plan have a provision for disability?
* Have I involved both family members AND key employees in my succession planning?
* Do I have a disability buy-sell, or overhead expense coverage?
* Do I have contribution protection for my retirement if I were to become disabled?

Again, these eventualities always seem remote on the front end … but if your answer is “no” to more than a couple of the above questions, it would be a good idea to get in contact with someone competent to help you fix it.

“I look to the future because that’s where I’m going to spend the rest of my life.” -George Burns

#4: What are your retirement plans?
Questions to consider:
* Do I know how much income I will actually need at retirement?
* How much control in the business must I maintain to secure my retirement income?
* Have I looked into financing options for key employees to buy me out?
* Do I want to be running my business, full-time, five years from now?
* Do I have contribution protection for my retirement if I were to become disabled?

Too many business owners view their business as their “retirement cash cow” … but have not made serious plans for how it can BE that cash cow.

#5: Are all of your eggs in one basket?
Questions to consider:
* Do I have reliable investments, other than my business?
* Will my business assets account for less than 25% of my retirement plans?
* In the past year, have I spent more than one hour planning my retirement?

If you haven’t diversified your retirement income outside of your business, you could be in trouble.

#6: Is there a REAL tax strategy?
Consider these questions …
* Am I pro-actively planning to deal with tax law changes?
* Have I determined my financial goals — and how taxes will affect them?
* Will I maximize my tax-free earnings in retirement (and before retirement)?
* Do I have an exit plan for my business — and is it written down?

Again, all of these issues always seem “procrastinate-able” on the front end … but if you don’t have a good answer to more than a couple of the above questions, you might be cruising for a financial bruising.