Small businesses – those with a few million in revenue to approximately $50 million in revenue – are often run by their founders.  And because these founders were generally experts in their fields before they were tasked with running an enterprise they tend to incorporate less planning in their businesses.  Rather, these owners often set the strategic directions of their businesses in an ad hoc manner, incorporating various techniques to drive their businesses while mostly setting the direction of the business with their instincts.  The purpose of this newsletter is to emphasize the importance of seeing into the future with your planning – particularly with your exit planning.

The Planning Process, Generally Speaking

Generally speaking, the process of planning for a business’ future is all about setting the direction for the enterprise with the best knowledge and inputs available today.  The planning process is not only about forecasting the future, it is also about gaining focus and consensus amongst the team that assists the owner.  Done properly and consistently, the planning process for a business provides direction, communication, alignment of resources, and a plan for executing on the initiatives set forth in the plan.

The Six and Twelve Month Plans

While the planning process is about looking into the future, it is a matter of how far into the future any owner can see that is the greatest challenge.  While the visibility of a business’ future is often difficult to see beyond the immediate 24 to 36 months, it is important to look beyond these more obvious planning dates when planning an exit.  For example, an owner may be accustomed to hold planning meetings for the next three (3) to six (6) months for their business.  At a tactical level, this three (3) to six (6) month plan provides immediate direction to the managers and allows the momentum to carry forward with the businesses’ current initiatives.

From time to time the planning process will complete a vision for the entire next year (i.e. 12 months).  For companies and owners who conduct annual business planning sessions, they usually occur in the fall or winter seasons, prior to the expiration of the existing calendar year.  The planning process is usually started with a projection or a goal for desired revenues for the next year.  This target goal is often agreed to by the management team and, once set, the ‘process goals’ are discussed and agreed upon to focus the team.

The Five (5) Year Planning Process

A smaller number of business owners will meet with their teams and engage in multi-year planning processes, up to a five (5) year plan.  Being able to look as far as five (5) years into the future fundamentally changes the nature of relationships between owners, their businesses and the management team.  By creatively thinking through what the business will look like in five (5) years is not only a challenging exercise but also a rewarding one because it forces the team to think creatively about the possible future vision for the business.

How Business Exit Planning Extends the Planning Horizon

One of the most challenging forms of planning is for an owner’s ultimate departure from the business’ day-to-day involvement.  Not only does an owner need to look further into the future than ever before, but because this is such a personal decision, these owners are often times doing so without the input of their supporting management teams.  An owner is taking on a large challenge when they can incorporate this much of their future into their current plans because business exit planning is, at some level, the ultimate form of planning for most privately-held businesses.

The point behind this newsletter is to have you ask yourself how far into the future you are able to see.  Because the more ‘future’ that can be incorporated into this type of planning, the more successful the overall planning process is likely to be and the better you will be at seeing your business pass on to the next owner successfully.

What to do if Your Vision Cannot See Beyond the Short Term

So looking into the future is a challenging, but rewarding exercise.  And it is helpful to know that owners often are aided by the counsel of others in this complex and personal process.  Professional and experienced advisors who focus on exit/ transition / succession planning can be very helpful to moving an owner into a position where they are including more of the future into their overall planning.

Concluding Thoughts

Running and growing a business is tough work and the balance between addressing current pressures while also addressing the future needs to be balanced carefully.  I hope that this newsletter has helped you ask how much of the future you are incorporating into your planning and that you can see some of the limitations of not looking further into the future.

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