FIVE ATTRIBUTES OF SUCCESSFUL ENTREPRENEURS, FIVE TIPS FOR RUNNING A BUSINESS AND SUCCESSION PLANNING 101Submitted by Business Owner Succession Strategies | Edina, Minnesota on March 4th, 2022
What does an entrepreneur need to create a dynamic company? The right mindset is a big part of it.
As an entrepreneur, you devote half your time or more to the daily hustle, making things happen and accomplishing goals. The other half is looking ahead, knowing where you want to be and when. For some, overcoming the mental anxiety of uncertainty is the first big step.
The nights of self–reflection during the early startup phase always give rise to a lot of our own demons and make us realize how little we know. But a big outcome of those conversations will be the realization that companies and startups are essentially a reflection of a founder. If you – as a founder don't realize that – then it is going to be extremely difficult to build a long–term business.
For some of you, your business is a direct reflection of your passions and interests. For others, entrepreneurship means taking quick advantage of a trend that no one else saw, and making it into a great exit strategy.
So how can you make your mark as an entrepreneur? What does it take to succeed?
BEST PRACTICES & CAUTIONARY TALES
Businesses that came before us left behind a trail of best practices and cautionary tales to explore. One of the most important suggestions to heed is that you need to get real about your entrepreneurial capacity. Take a long look at your financial status, connections, online presence and energy. If you understand your entrepreneurial strengths, your financial incentives and the outcome you hope to achieve, then you're already on the way there.
Here are five attributes you must have before you even start your business.
1. Have a positive vision. Embrace a millionaire's mindset. Starting a business is a huge risk, but you have to believe in yourself. Imagine yourself with credit for the business and money to do with what you please. Make a few phone calls, share your vision with other like–minded individuals and ask for help making it a reality.
The greatest ideas of the past 25 years all seemed far–fetched at some point, and yet the founders pursued their individual vision with others who could help. If thinkers like Steve Jobs and Jeff Bezos were too rational, practical or realistic, they may have never founded companies that make our lives better today.
2. Manage your ego. Ego works only as far and as much as you let it. As a founder, ego and charisma can help make people around you committed to getting onboard with the business. But left unchecked, an entrepreneur's ego can also get in the way of good business savvy. Good entrepreneurs find it better to diminish that hungry ego in favor of sharing and caring.
Successful tech whiz–kids often bring more stable, level–headed pros to manage operational aspects of fast–growing businesses. A driven entrepreneur needs to know that having the right team around him, without a rampant ego, can bring a greater sense of fulfillment.
3. Obtain financial guidance. If you're a creative genius with a head for sales but no brain for finance, you might find yourself steering near a rocky coast without help. Retain a tax professional to put aside tax money for you, and keep track of your income and expenses with a business credit card. Many business credit cards, for instance, itemize professional purchases and provide year–end statements with expenses broken down by categories, which helps you save on accountant fees and understand your financials better.
4. Delegate, delegate, delegate. Too often, entrepreneurs feel they can handle everything. To everyone else, it's obvious that they can't, so pay attention to the warning signs of job burnout, and don't be afraid to delegate work or shake up your schedule. For example, instead of scheduling meetings for an hour allotment, cut that in half. Two back–to–back 30–minute meetings feel less sluggish.
5. Remember your king. Your client, partner or customer is king. Don't forget that. Never losing sight of who you need to impress or sell is key to a successful entrepreneurial venture. Make sure you remember to put 99% of your efforts into pleasing the king.
Follow some of these tips to help make your path to entrepreneurial confidence move a little smoother and easier. Overcome the difficulty and follow your dreams.
FIVE TIPS FOR MANAGING YOUR OWN BUSINESS
Maybe you started your own firm on a leap of faith years ago. And knowing nothing about running a business when you began, you earned plenty of lessons along the way. Here are some "been–there–done–that advice" that might be helpful if you are running your own venture. Because actually running a business is something that no one ever teaches in school.
1. You wear a lot of hats. Being a startup founder means playing many different roles that you don't concern yourself with when you're on someone else's payroll. You need to learn the skills involved in various tasks to make your business work.
For example, let's say that you're a plumber, and a great one at that – but what do you know about marketing your business, pricing your services, ordering equipment and managing employees?
When you start a business, you have to find a suitable place to rent, and choose and buy office equipment at affordable prices. You have to learn to market the business, hire staff and train them. And you have to do all of these while not compromising the service the existing clients received.
2. Frugality is a virtue. Businesses fail for a lack of positive cash flow more than anything else. You can give yourself a big, fat advantage by cutting down your overhead.
All stuff costs money, and when you start a new business, money is something in short supply. This means you have to think shoestring – finding less expensive ways to do everything and letting go things you don't absolutely need.
3. Put things down in writing. Anytime you start a business, even if you're a sole proprietor, you are involved in all kinds of loose and informal partnerships. A bad relationship has the potential to sabotage your business. So choose wisely and sign formal agreements.
Maybe your colleagues and you went into the business as a partnership, but that always presents special challenges. These might not necessarily be people you would hang out with after work, but all should be individuals you feel you could trust and be comfortable with on a professional level. If you agreed on how to run a partnership in advance, then commit your agreement to writing.
Partnerships don't always work out, so you have to have written procedures on how to run the business, how to settle disputes, and if necessary, how to handle the departure of a partner. The same applies to your relationships with suppliers, vendors, contractors or even clients.
4. Focus on what brings in the cash. The biggest key to running virtually any business successfully is your ability to concentrate on the activities that bring in the most money.
This is particularly important for startups. Building cash flow has to be your top priority. That means you have to minimize the time spent on routine functions. You need to identify repetitious tasks from the very beginning, and streamline them immediately to maximize efficiency.
Maybe you hate doing paperwork and administrative tasks, so create a workflow that makes them as simple as possible. Some of the functions include accepting client checks, making bank deposits, opening new accounts and conducting annual reviews with existing clients.
5. Make sure you have some paying customers first. This may be the single best piece of advice you can receive. If you already have a client base, at least half of your business risk is gone. Having an established client base is huge.
SUCCESSION PLANNING FOR BUSINESS OWNERS
Hopefully your business will grow to the point where you, the owner, are called upon to undergo a radical transformation and change from being the "doer" to being the manager.
The transition is generally not difficult if it is eased by preparation, most of which will involve your family and/or business partners. It then becomes essential that everyone get together to talk over the business issues that will affect their lives.
The discussion should determine:
Who will be active in the business;
What their roles in the business will be;
How participating individuals will be compensated; and
What compensation inactive members will receive.
And this gets tricky with family members, because you must be able to entertain the views of family members and articulate your own views and interests.
Out of a series of discussions, a succession plan should emerge. This plan must take into account your age and health, as well as the expected rate of growth of the business. It must also consider the ages of everyone else, including your spouse and children, in addition to their abilities and interests. Because of the variables involved, any succession plan should be subject to modification as developments take place within the business and your family.
Who is Your Successor?
In any case, a succession plan should look to ways and means of designating your successor. An important factor in choosing a candidate will be on-the-job training and experience. Outside job experience and academic achievement and preparation are also important.
In the opening stages of the discussion regarding the succession plan, the question of compensation or other distributions will probably arise. As the owner, your views should take precedence. If you are disposed to treat your children equally, for example, the family conference should be the ultimate arbiter.
Succession planning may also include stock transfers. Stock transfers involve tax considerations, that is, income, estate, and gift taxes. Use of the annual exclusion and unified credit come in to play as a means of reducing estate taxes. Stock held until death will receive a "stepped up cost basis" and eliminate potential capital gains income taxes on the growth.
Family members should also discuss the structuring of a buy–sell, entity, or cross-purchase agreement funded by life insurance. If an unfunded plan is put into effect, the family owners who will ultimately be buying your interest in the business may not have the cash or the borrowing ability at your death. An appropriately drawn will is also part of the process.
Crucial to the ultimate outcome of a succession strategy is the development of a business plan that analyzes the immediate, intermediate, and long–term goals of the business. The plan should be based on financial forecasts and budgets that are adaptable to changing conditions and checked against actual results.
Consideration should also be given to the inclusion of non–family members on the board of directors who can bring new ideas to the business and help mediate any family disputes that may develop within or about the business.
YOUR FINANCIAL PROFESSIONAL
There is no doubt that starting a new business requires a lot of dedication and a fair amount of luck. And running an established business requires different skillsets relative to launching a startup. And of course creating a succession plan introduces a whole new set of challenges, many of them relationship–based.
Layer on top of those changes your need to save more, manage your money better and ensure your financial plan is personalized to your risk tolerance, and it's easy to become overwhelmed.
But a financial professional can help you consider all your needs and provide guidance as you make decisions tailored to your business goals, no matter what stage your business is in.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.
Nothing contained herein shall constitute an offer to sell or solicitation of an offer to buy any security. Material in this publication is original or from published sources and is believed to be accurate. However, we do not guarantee the accuracy or timeliness of such information and assume no liability for any resulting damages. Readers are cautioned to consult their own tax, legal and investment professionals with regard to their specific situations.
This article was prepared by FMeX.
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