Many business people will at some time have committed to producing a formal business plan. Some of them will also have a personal financial plan. I advocate that EVERY business person needs 2 plans to adequately cover all of the eventualities they will face.
1. Business plan
A business plan should be no more than one A4 page one-sided. I am a fan of having it in a frame on your desk. It needs to simply state where you are now, where you want to be, the steps needed to get there, and the threats to achieving the goals. Goals need to apply S.M.A.R.T. (Specific Measurable Achievable Realistic Timeframe) principles, the steps need to be defined as a series of milestones, the threats will be as much internal as external.
A business plan does not need to be a weighty door stopper, which sadly many of them are, containing full SWOT analysis, detailed budgets, economic forecasting and all that stuff, because if it is, it will become exactly that – a door stopper. Don’t know how many of them I’ve seen over the years that cost a fortune and were only read once, in fact I’m guilty of authoring quite a few.
By having your business plan clearly visible at your place of work, your attention will inevitably be drawn from time to time towards what it is that you are trying to achieve. It might even be that your attention will be refocused on what you should be doing, what you have committed to do (if only to yourself), to those activities which you need to do to get the results that you want. We all have a tendency to sometimes find ourselves doing things that really do not make any positive contribution to our business at all. One of the activities I have committed to do for example is to write an article like this one at least once per week. If I did not have sufficient focus, it would be all too easy to fill my day with other less important, and less productive “work”.
2. Personal Financial Plan
The same principles apply to your personal financial plan; where are you now, where do you want to be, what are the steps to get there, what will stop you from doing it.
This needs to be separate from your business plan, and will likely have a longer time horizon. Believe it or not, there will be life after business for most of us, so our personal plan needs to take into account the disposal of our business, the accumulation of assets to fund our lifestyle after the business no longer does, and an assessment of how much we need to accumulate and by when.
Failing to plan leads to lack of direction. Its trite to say if you fail to plan you plan to fail, but without some idea of your goals and how to achieve them, there is little likelihood of a successful outcome. As a child I remember being envious of a friend who purchased a new bike, thinking how lucky he was to have been able to do so. Of course luck had nothing to do with it! Whilst I had been spending my money on ice-cream, he had been saving his for something that he really wanted. He ended up thinner than me AND had a new bike!
The most difficult thing at a personal level is usually working out the goals. How much do I need to achieve what I want can usually be worked out by simple arithmetic, but many people fail to even do the sums, perhaps because they would rather not know. Having determined how much is needed, we only then need to commit to setting aside the funds necessary to accumulate the amount. Simple eh?
Of course the 2 plans will be interlinked. Maximising the success of your business will in turn maximise its value, and given an appropriate succession strategy ought to contribute to your personal retirement wealth. Too often though, I have seen business people focus so much of their attention on their business, that they neglect to ensure that all of their other “stuff” is covered. As business people we are all aware that business is inherently risky, the question we need to ask ourselves is whether we are prepared to expose our entire future, and that of our families to this level of risk. I advocate that a relatively small commitment of funds to a personal financial plan, ticking away outside the vagaries of the business world, is a great way to maximise the likelihood of achieving the outcome that we want.
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