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The need for solid business strategy planning becomes particularly evident in a crisis. The Covid-19 pandemic has posed a threat – not only to the physical health of individuals but also to the economic survival of many closely-held businesses.  The nation has been put into a medically induced economic coma, and every means is being used to survive it.  Employees and owners alike are resorting to emergency measures to survive: drawing down savings, relying on government support, and even taking withdrawals from retirement accounts.

This crisis, like all crises, exposes gaps in planning.  As Warren Buffett has said, “you find out who is swimming naked when the tide goes out.” Common issues include inadequate cash reserves, excessive expenses, and outdated – or nonexistent – estate plans.

For business owners, the need for planning is even more important.  Owners are vividly aware that so many and so much –family, employees, customers, investors, local community groups, charities, and their own future – all depend upon their financial success.

Business Strategy Planning

A sound business strategy requires a careful assessment of your strengths and weaknesses, opportunities, threats, and risks.  As noted, it is the risks that are exposed and become potentially debilitating weaknesses during a crisis.  Here are a few examples of the questions you might ask as you begin this process:

  • Do you have reserves and/or credit facilities in place to ensure the resources you need to endure unforeseen challenges or opportunities?
  • How much of the business’ day-to-day success depends on you? Business owners are often their own best employee, and the survival of the business may depend on their efforts. What have you done to make sure that other people can pick up the mantle should anything happen to you?  Building your “human capital” is necessary to grow your business beyond the limits of your own abilities and to preserving your legacy after you have moved on.
  • What can you do to strengthen, expand, and diversify your customer base?
  • Do you have a contingency plan in place for your business? When was the last time you reviewed your corporate structure, buy-sell agreements or the business implications of your estate plan?
  • Does your retirement plan match your company’s needs and your personal needs?

These are just a few items you will want to consider.

As a business owner, there is often no clear dividing line between your personal life and your business efforts.  Since the business is typically the owner’s largest asset, it is vital to address both sides of the equation.  Failing to address the one will invariably and adversely affect the other.  On the personal side, you will want to ask:

  • Assuming that you want to have a life after your business, do you have a current financial plan that can help to guide you to a successful retirement?
  • What steps have you taken to build wealth OUTSIDE of your business? No one needs to tell you that good times don’t last forever.  And the shocking truth is that most businesses won’t be transferred or sold; they will simply close.  Whether or not this is true for you, it is critical that you accumulate assets outside of your business so you and your family can enjoy the fruits of your labors in the future.  A well-designed portfolio allows you to diversify your risk, participate in the growth of other well-run companies, and generate reliable cash flow (dividends and interest).
  • Given how much depends on you, when was the last time you reviewed your estate plan, advanced directives, and beneficiary designations?

Once we begin to emerge from this crisis, it will be an urgent priority to address these concerns so you can reduce your vulnerability to such shocks in the future – and they will happen.  Every bit as important, a sound plan is necessary to help you realize the future you want.

Does this feel overwhelming?  That is understandable since doing these things takes time and attention.  This may well be why you put off planning to begin with.  Since your day-to-day responsibilities already consume so much of that time and attention, we recommend taking advantage of the expertise and guidance of professionals to help you address these concerns.   The first step is to make an appointment with a seasoned financial advisor as soon as possible who is qualified to assist you in business strategy planning.  Give us a call. Our advisor, Chris Chaney, is a Certified Exit Planning Advisor (CEPA). If you aren’t familiar with it, the CEPA Program is the most widely accepted and endorsed exit planning program available, focused around cross-functional consulting and value acceleration.

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