The Essential Document Every Business Owner Must Have to Succeed

Two Choices

There are two types of business in terms of how they operate and the strategic goals of the founders. It's vital to be clear on which type of business you're building.

#1. Lifestyle Business

Sometimes referred to as a "cash cow" business, most companies, across all sectors are structured in this way and there are 5.3 million 'micro-businesses' (0-9 employees) in the UK, accounting for 95% of all businesses.

In most cases, they are unlikely to create significant capital value and indeed 90% of all businesses are never sold.

Therefore, to prepare for the time that they want to slow down or retire, the owners need to consider how to build their resources outside of the business through tax-efficient saving and investing.

#2. Enterprise Business

Also known as 'scale and sale', this is a different kind of business to the Lifestyle option, with different ambitions, goals, and culture. This type of company plans to scale up, may take funding from a bank or venture capital (VC) company and will be targeting a successful sale.

Much of the company's profits will be reinvested in product development, marketing, and recruitment. The Founders' own compensation will often be kept low in the expectation of a pay-out upon a successful exit.

The "North Star" for your Entrepreneurial Journey

Regardless of your business model, it's essential that you have a documented Financial Life Plan. Your FLP will capture essential information about your current and future lifestyle and resources - and will overlay it with details of your goals and aspirations - your vision of an ideal future.

Your FLP is a roadmap and will outline what steps you need to take to ensure your family's financial security.

Running your business without your own Financial Life Plan is like setting off on a journey with no clear destination in mind - best avoided!

“If you don’t know where you are going, you’ll end up someplace else.”

Yogi Berra