A well run and profitable business requires successful management of strategic challenges. Such challenges include decisions about compensation structure, hiring family versus external people, sales goals, profit goals, continuity issues and more. We have discussed several of these business challenges over the last several weeks.

At the same time, we must remember that every small business is a family business. This is true whether family members actually work in the business at the present time or not as every member of the family will be affected by the decisions made about and for the business.

Experience has shown that those business owners who stay on the path to success remember to identify their personal goals and create business strategies that are in line with long-term goals for their personal life.

Unfortunately this is not the norm, with most business owners viewing the business and its operational goals as completely separate from the family.

Fortunately strategic planning for both the business and the family can provide a forum for alignment of potentially competing interests. The Owner's Plan, which we referred to in a previous article, is the link between these two "worlds".

The owner's plan will address several points, including:

• Personal goals, including the owner's vision for the business today and beyond.

• The owner's financial security.

• An exit or succession strategy.

What do you want?

Defining what you the owner want to do, what you want to achieve, how and over what time period, both personally and in the business is the critical first step. Misalignment of personal and business goals commonly produces the symptom of a business experiencing an unexplained plateau. Growth may slow down, the business may seem to lose direction and employee morale is negatively affected.

Commonly expressed goals include: (1) continuing to be active in the business, (2) increasing time spent with the family, (3) developing personal skills not related to the business, (4) pursuing a hobby or travel, (5) creating a new business within or outside of the existing business.

To the extent that these goals conflict with the stated or unstated goals and operational plans for the business, a process of reconciliation must begin.

What do you need?

The owner's plan includes:

• An analysis of the owner's income and cash flow.

• A projection of the owner's required financial resources to maintain or achieve a given standard of living.

• A projection of the owner's anticipated resources under different alternatives.

What is the impact to the future of the business?

As the owner's personal goals, roles for the future and preliminary financial matters, are addressed, succession goals will begin to clarify. Successful implementation of the succession strategy (without impediment to the owner's personal and financial objectives) must now be achieved.

Advisers including a financial planner and legal counsel can help to shape the owner's understanding of the financial and other ramifications.

The financial planning advisor will help look at the impact of the proposed or current succession plan on the owner, the business and if relevant, family or external stakeholders, projected over a relevant time frame.

The Revised Owner's Plan

The model is refined and re-run to evaluate potential alternatives and refine goals, as necessary. All plans must reflect tax, wealth transfer and other financial planning considerations, as well as so-called softer issues, such as who should have control and when, fair distribution of wealth and future leadership.

The Ultimate Business Guide

A business that is guided by a clear understanding of how it supports the owner's personal goals is one that will flourish. Strategies will be clear and easier to communicate. Hiring, training and retention strategies will be easier to manage. Family issues will be easier to navigate. This in turn, should result in happier staff, happier customers or clients and increased profitability.

This article is part of a series reflecting on some of the 'best practice' issues and considerations relevant to owners of privately held companies.

Asgill Post Ltd. provides assistance with Business Valuation, Financial Strategy and the Purchase and Sale of Companies. For comments or queries, contact Kumi Bradshaw MBA, CBA, BVAL via email at kumi@asgillpost.com or phone at 295-3301 Patterson Partners Ltd. provides cross-border tax, estate, investment and strategic planning services. For more information, visit www.patterson-partners.com or contact Jennifer A. Patterson, CFP®(US), CIMA®, TEP via email at info@patterson-partners.com or phone 296-3528.