If you’re a business owner or leader, no doubt you will now be back in the swing of things business-wise. September can be a good time to assess where you are with your business and to set goals for the rest of the financial year and for the future.
Earlier this year, we wrote an article on personal goal setting to help you focus on your future objectives, especially when it comes to retirement planning. The same applies when you run your own business. Do you have a 5 or 10-year plan? Do you have an exit strategy? Do you plan to sell your business in the future? We have put together a step-by-step guide below aimed at business owners to help you assess whether your business objectives are aligned with your personal objectives.
1. Why is it important to align your business and personal goals?
When you run your own business, it has a significant impact on your personal life, especially in the early days. Most business owners work very long hours to achieve their targets. When a business gets to a certain stage, you may be able to take on employees to help you manage day-to-day operations and/or expand. At this stage, it is important to take time out and reflect on your business to understand the following:
a. Why did you create your business in the first place?
b. Does your business run in the way you intended it to?
c. How does your business impact on your personal life?
If you are unhappy with any of the above points, then it’s worth carrying out a business review. For example, if you feel that your business is impacting greatly on your personal life, you may need to find an extra resource to help you manage your business. You may have started your business to get a good work-life balance, but you may be unable to achieve this at present. This could have repercussions in the future, especially in relation to your retirement planning. If you work yourself into the ground, you may not be able to do the things you plan to do in the future. Therefore, your personal goals need to align with your business goals.
2. Where is your business right now?
You may be happy with the way your business is running, which is great. However, if you do have certain aspirations or personal goals, you may feel that you need to increase your profit margin, so you have enough funds to support a comfortable retirement. Consider the following questions:
a. Do you know the value of your business?
It is important to understand how much your business is worth and this should be done on an annual basis, or after a period of growth or expansion. Understanding how much your business is worth could determine your plans for the future.
b. Does the business rely on you alone?
If you’re essential to the running of your business, what happens when you’re not there? Do you have trusted people you can rely on to manage your operations? If you are aiming for a better work-life balance, so you can achieve your personal goals now or in the future, then it might be time to consider delegating some responsibilities to others. Do you have the capital to employ people or outsource certain tasks?
c. Do you have an exit strategy?
Every business needs to have an exit strategy in place. Even if you don’t plan to retire, unfortunately, none of us live forever, so you may need to write your business interests into your Will. Planning your exit strategy all depends on your long-term objectives for your business and your retirement – we explore this further below.
3. Where do you want your business to be in 5, 10 or 15 years’ time?
Depending on your age and your future plans, you may have already decided where you want your business to be in 5, 10 or 15 years. Ask yourself the following questions:
a. Do you intend on selling the business?
You might be considering expansion; scaling up your business to increase its value and make it more attractive for future sale. Therefore, a business review and correct valuation are crucial to forecast an accurate figure when you come to sell your business. Read more about selling your business.
b. Do you have someone in mind to take over the business?
You may be in the process of training an employee or a family member to take over your business in the future, so you can retire with full peace of mind. Make sure this is legally recognised and added to your Will, should the worst happen.
c. Are you deliberately scaling down your business?
You may be in the process of downsizing your business, so you can run it at a level which enables you to achieve your personal goals. This is an option for many over-55’s due to the ‘pension freedoms’ which allow people to draw from their pensions before they retire. Remember that taxes will apply to early pension benefits, so always speak to a professional for financial advice before drawing from your pension.
If you enjoy what you do, you may not want to retire just yet. One consideration here is to review your overheads – for example, look at the current cost of leases and rent on any commercial premises. Could you streamline your operations? By reducing your overheads, you will increase your profit margin, which will help you to create a secure financial buffer for the future.
Plan, plan, plan!
If you haven’t yet set a 5 or 10-year plan, then we strongly advise you to do so. Without a solid business plan in place, it is easy to drift and lose sight of your long-term objectives. Make sure your personal goals are always in line with your business goals to move you comfortably towards retirement. And if you don’t plan to retire, then create a secure strategy to keep your business operating for the long-term. None of us know what the future holds, so advance and effective business planning will alleviate any worries for the future.