As a business owner, it can be hard to focus on the big picture because of day-to-day tasks that can consume your time. It is easy to lose sight of long-term goals and forget to make plans for future changes in circumstances.
Life intervenes and situations arise that cannot only affect your personal life, but your business and its value as well. This article explains ways to protect the business that you worked so hard to build.
Every single business plan, goal, vision, consequence, leadership roles, etc. should be written down in one document -- something I like to call, "The Business Constitution." This document needs to provide the framework that you or others can refer to when making decisions that will affect the business.
The more you lay out in writing, the more detailed your constitution, the better protected your business will be. When tough decisions need to be made, you have a source to guide you to a solution that is not just thought about in the heat of the moment. The three most important parts that must be considered and written down include an exit strategy, life events and a business legacy plan.
Exit Strategy -- When people start a business, they already have an idea of what they want to accomplish. Those ideas change over time, and there needs to be a way to accommodate those changes. Many times, business owners deal with immediate goals, rather than long-term goals. It is very important to sit down and think about why you started this business in the first place and what you want the business to accomplish.
You need to have an exit strategy in place in case something happens and you can't continue the business for some reason. The business may be the largest asset you have and by having a well-defined exit strategy, your long-term vision for its continuation and transition will be smoother.
Life Events -- Even among the best partnerships, life events can make or break a business. It is very important to have a plan in writing on how the business is going to deal with certain life crises. Some businesses start off well, get really busy, and then life intervenes. Events such as death, divorce, bankruptcy, being sued, accidents, etc. all can derail an otherwise smoothly operating entity. There needs to be a plan for all major life events that could potentially destroy a business and how you are going to deal with them.
Business Legacy -- There will come a time when you will need or want someone to take over your legacy. Sometimes business owners build an empire to take care of their families for years to come, however, most businesses, 70 percent, fail to make it to the 2nd generation.
That percentage increases from generation to generation. It is very important that the owner's vision for the business be outlined in the business constitution. There needs to be a clear distinction of the roles within the business and which leaders will ultimately be making the calls. The plan needs to be designed to keep the business running.
With all three of these items addressed in your business, you will be more prepared for unanticipated future situations that can interrupt your life's work. The business constitution is the key piece to making sure that the business is protected in the long run.
Without knowing your vision for the business, you increase the chances it will not continue or its value will be greatly diminished. Take the time to sit down, think things through, and create a business constitution that explains what to do in every situation to protect yourself, your family and the legacy you have created.
• Michael Stuart, an attorney and CPA, is with Stuart Legacy Alliance, LLC Attorneys & Counselors At Law in Rolling Meadows.