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Financial
Planning for Your Business' Stage of Life |
Just
as your stage of life influences your personal financial planning
strategy, the same also holds true for your business. Successful
businesses experience a series of growth stages that include
emerging, successful and mature. Understanding a typical business
life cycle can help you identify the financial planning challenges
and opportunities that may arise as your company grows from
startup to maturity.
Stage 1: The Emerging Business
During the early years, businesses are generally entrepreneurial
and survival-oriented. Owners take risks, face challenges and
work long hours to earn rewards. While new businesses constantly
adapt to meet the needs of their growing customer bases, they
also are frequently short on cash. And when businesses finally
earn a profit, they plug much of it back into the business.
During this startup phase, the financial planning tools most
critical to a company’s survival and growth include:
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Financial
protection or insurance against major, unexpected and
potentially catastrophic losses, such as the death of
an owner |
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A
compensation and benefits plan that helps attract and
retain top-flight employees |
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A
succession plan, including key-employee protection and
a well-funded buy-sell agreement |
Stage
2: The Successful Business
Companies that successfully navigate the startup stage and become
prosperous usually have an established client base. They have
also achieved both a formula for success and a degree of financial
stability. Successful businesses need to continue following
the financial planning strategies that they implemented during
the startup phases. But at the successful business stage, they
can also focus on:
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Enhancing
efficiency |
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Improving
procedures |
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Growing
the business as quickly and efficiently as possible |
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Rewarding
owners and employees for sacrifices made during the startup
phase, and |
Using some
of their improved cash flow to fund employee benefits that they
could not afford before, such as qualified retirement plans,
nonqualified salary con-tinuation plans, executive bonus plans,
and disability and long-term care insurance.
Stage 3: The Mature Business
As a successful business matures, growth and profitability tend
to flatten out and the business begins to look for a new success
formula. Once again, the company finds itself in a stage of
innovation and risk-taking as it searches for new markets, new
products and improved ways to serve customers. This time, however,
the company faces these challenges with two assets it did not
have during startup: seasoned management and financial stability.
Mature companies should consider:
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Targeting
employee benefits to the needs of various groups.
For example, younger employees appreciate benefits such
as cafeteria plans, incentive stock options and employee
stock ownership plans. Meanwhile, retirement-minded managers
are usually more concerned about pension plans, long-term
care, and disability and life insurance. |
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Advanced
estate and succession planning techniques. Minimizing
estate taxes for company owners becomes more crucial as
the owners age and their companies’ values increase.
Owners should carefully review buy-sell agreements and
succession plans, as well as their personal estate plans,
and update them with the latest tax-saving strategies. |
Where
Is Your Company in its Business Life Cycle?
As your business progresses from startup to maturity, you can
take many steps to decrease its expenses, improve its value,
protect its assets, attract and retain key employees, and minimize
taxes. Please call, we can help you create a sound financial
plan appropriate for your business’s current development
stage.
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:
312.321.0300 > 
: 312.321.0364
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