The Benefits of a Life Plan
Do you need a life plan to buy or sell a business?
Buying or selling a business is a major step for all entrepreneurs. It comes with obvious financial risk which everyone understands and prevents many would-be-entrepreneurs from starting their journey. However, an element not many understand is that business ownership comes with many emotional risks that play a more important role than the money itself.
Benefits of a Life Plan
Entrepreneurs are constantly challenged by many emotional risks. The obvious one is success or failure. For most entrepreneurs, once they come to terms with the financial risk involved with business ownership, their next challenge is coming to terms with the fact that owning a business comes with the possibility it will fail. That alone is a concern but the real concern is what they will say to family and friends.
Another emotional risk which is part of an entrepreneur’s journey is handling the ups and downs. Every entrepreneur hopes there are more ups than downs but the downs are part of the landscape of being a business owner. This means not only emotionally handling these situations but more importantly, building and using different tools and resources so they are available when needed.
A further emotional risk is having the self-confidence and self-belief that you have the skills, tenacity, and acumen to handle all situations. It is a given that the capitalist system goes up and unfortunately and inevitably goes down. Each phase of the economic cycle requires using a different set of tools and approaches. Similarly, each individual business has its ups and downs. Generally, they follow the economy but this is not always the case. Many, many new businesses emerge and come to life in a recession. A new entrepreneur sees a need or identifies a trend and takes the idea to the market. The market embraces the idea and so the business moves forward and grows. If the idea is strong enough, it attracts others who also embrace the idea and so competition pushes and refines the idea; another emotion an entrepreneur needs to handle.
There are many more than the ones I have identified above. However, to help an entrepreneur understand and manage the emotional risks, it’s my suggestion that the first main action the entrepreneur puts together is a life plan. What is a life plan?
A life plan is a very broad and simple document that answers some basic questions. They will vary with the individual and their situation. Part of the reason for writing your plan life is so you can share it with the important people in your life and also as a place for you to come back to on an annual basis or as needed to remind you why you decided to become an entrepreneur.
From my perspective, this is critical. We often decide to do something major in life at a certain point for reasons that make sense at that time. However, our lives are constantly evolving and changing due to many external pressures, almost all of them outside our control. To have a document to look back at and jog your memory why you decided to become an entrepreneur can also help you decide in the future if your objectives have been met and it’s time to try something else in your life. Alternatively, it can be sustaining and invigorating to remind you why you decided to become an entrepreneur and allow you to refocus on that.
Just to repeat an earlier point, it’s important to share your life plan with those who are close to you. Don’t share it too broadly as it may become a document others judge or hold you accountable. It’s not a document of accountability, it’s a place to keep your thoughts so you can be comfortable with the decisions you are making.
Some of the thoughts to keep in your life plan can include what’s personally important to you and what you hope being an entrepreneur will allow you to do. If it’s to support your family and allow you to also contribute to local society, include those thoughts. If values are important to you, what values will you bring to being an entrepreneur? What are your priorities and how do you intend to manage those priorities when they come in conflict with other priorities? What should happen with the business if something happens to you?
The ultimate goal of creating a life plan is so you can become at peace with your decision to become an entrepreneur. As I’ve mentioned, our lives are constantly evolving and changing. We adapt every day to change. Being able to easily and readily adapt to that change will be the main ingredient to your success as an entrepreneur. Understanding why you decided to start that journey in the first place and being able to remind yourself about this will help you make the many decisions along the way and keep you grounded. There is also great value in keeping your life plan up to date, at least on an annual basis. Once again, it will provide a sanctuary for your thoughts in case you are confronted with major events or changes in your life such as a serious health issue, death of a loved one, divorce, the birth of a new child, a major change in the economy or any other unknown situation.
Part 3 of this article series discusses the importance of a Financial Plan to an entrepreneur and includes some suggestions to help make sure your work as an entrepreneur is a financial success for you.
If you’d like more information about how to transition out of your business, feel free to get in touch with me for a quick consultation. We’ll discuss your particular business, what’s important to you and make a plan for those first few steps.