Small Business Planning Lacking
Accountingweb.com led with that blanket statement in a report last week. Their new survey shows small businesses which are built with their owners? sweat and diligence, are giving little thought to their business? futures. Papalia Financial sponsored the survey of 200 small business owners in Connecticut, New Jersey, New York, and Pennsylvania. The survey, which Papalia released in September, shows that 85 percent of the respondents acknowledge that they are not content with their current financial planning.
?It?s surprising and even a bit alarming to find so many small business owners taking such a casual, shortsighted approach to plotting their future,? said Mark Papalia, President and Founder of Papalia Financial. ?When you think about how much time and effort these entrepreneurs have invested in their enterprises, you would expect them to have a more structured, formalized plan to preserve their assets for the future.?
Business and succession planning is important but:
38 percent said they ?do not have a business succession plan or long-term exit strategy? set for their business.
30 percent said that their plan ?is in my head only and has not been fully documented?.
10 percent acknowledged that their plan ?is not fully developed? and that they ?should have a real plan?.
Do you recognize yourself in any of these statements? I did. For a long time I was in that 30 percent category. That?s where the Get Your Financial Year in Gear program came from ? to fully document what I am doing now and how it will play out for the future. Papalia was surprised that these business owners didn?t have a formal plan. I?m not. There are only so many hours in the day and until it becomes a priority, entrepreneurs are wearing too many other hats to take time out to get it done.
In the survey, when asked about business financing, 26 percent of those polled preferred ?home equity loans? over other financing options. This surprised the author who is not a small business owner/family business owner.
I agree with the first half of his statement: ?Most small business owners should not be exposing their personal assets in this manner, as it creates unnecessary risk and liability concerns,?
But I disagree with his one size fits all solution, ?Far better options would be to utilize a long-term corporate loan, based on expected capital expenditure needs over the next five years, along with a corporate line of credit to meet short-term fluctuations in cash flow.?
An investor explained to me at a recent venture capital forum that 65% of all small businesses/new businesses are self-funded, using personal and family assets because it is cheaper, easier and you keep control. 65% of small businesses can?t be all wrong.
About the Author: Kerri Salls, MBA runs a virtual business school to train, consult and coach small business CEO's and entrepreneurs in 10 key strategies to make more profit in less time. Learn more at http://www.breakthrough-business-school.com/products.html or sign up for a free weekly newsletter at http://www.breakthrough-business-school.com/newsletter.shtml