Here’s an understatement: Few business owners were prepared for the impact of the pandemic. Within days and weeks, as orders disappeared and daily life ground to a halt, promo owners were confronted with defining decisions. Should they lay off staff? How were they going to find sales? How could they cut expenses – fast? What could they do to make sure their business survived, and even thrive?

Many, paralyzed by indecision and fear, did nothing. Others made difficult decisions quickly and set their companies on a road to salvation.

What was the difference? It wasn’t magic. Those who were familiar with how their businesses were running could pivot more quickly than those management teams that needed to get up to speed first. And how were they familiar? They had a plan.

Consistent scrutinizing of a company’s operations requires returning to the original business plan, the firm’s framework and ensuring that everything is on track, including making adjustments when necessary. (Don’t have a plan? Don’t worry – it’s never too late to create one.) It’s one of the most important parts of running a business: having a roadmap. According to business plan advisory site Bplans, 71% of fast-growing companies have plans, including budgets, sales goals, and marketing and sales strategies.

The plan is also a living document that evolves as the business grows, and gives direction to the company. It shows what areas need to be addressed and can provide answers on how to do so, which not only gives direction for scalable growth, but also comes in handy in the event of an emergency (like a downturn such as the pandemic) and especially at the exit phase of the company, when owners want maximum value for the work they’ve put in.

Revisiting the plan also lets management monitor the company’s lifeblood: its cash flow. Without knowing exactly what money is coming in and going out (and where it’s going), the company will lose steam quickly and could even shutter. According to the Bureau of Labor Statistics, about 20% of small businesses in the U.S. fail within the first year. After five years, about half are closed. And this accelerated in 2020. In just the first three months of the pandemic, review site Yelp reported that 41% of closures noted on their platform were permanent.

4 in 5
small- to medium-sized companies do not have a prepared business plan.

(Rosenfeld Kant & Co)

“Most businesses fail because they run out of cash,” says Stephanie Sims, founder of business consulting firm Finance-Ability, author of Funding Your Business Without Selling Your Soul and host of the “What’s Your Ask?” podcast. “This is one of the most important yet least discussed topics for business owners. They often don’t know their numbers, so they make poor decisions about how to grow and fail to acquire the capital they would need to do so. A solid financial plan is at the heart of knowing those numbers, and building that plan is an ongoing process.”

By reviewing the plan and financials and adjusting as necessary, owners and their management teams can make sound decisions for the business. Here’s what that looks like at every step – from the founding of the company all the way through the exit stage.

Starting With a Roadmap

A company is like a person, says CPA Keith Chulumovich, managing director at Detroit-based business consulting firm O’Keefe. It starts as a baby that needs constant nurturing and then ideally grows into a mature business. When it’s still in the beginning phases of operation, owners need a plan that acts as a guide for where they want to go.

“It starts with a vision,” says Chulumovich. “What do you want to do? How many hours a week do you want to work? After that, develop a business plan to get you there. Figure out how to do it and how much money it will take.”

Unfortunately, he says, entrepreneurs tend to be more optimistic than realistic when writing plans. “They think, ‘Sure, no problem. I’ll definitely be able to sell this product at that price.’ But reality is reality,” he explains. “They don’t have a Plan B for what happens if it doesn’t work out. You have to figure out how to survive if it takes 12 months instead of six months to sell something.”

“It starts with a vision. What do you want to do? How many hours a week do you want to work? After that, develop a business plan to get you there.”Keith Chulumovich, O’Keefe

It’s imperative for business owners to have a plan that includes a marketing strategy and financial outlook. But too many still just trust their instincts, hoping that their entrepreneurial spirit, ambition and drive will be enough.

“They know it’s important, but they still don’t do it,” says Carolyn Scissons, CEO of financial literacy education platform Finance Learning Lab in Calgary. “It seems big and scary and they feel overwhelmed. It’s OK to have an imperfect plan. Just take five minutes and get started. Even if it’s ugly and full of bad assumptions at the beginning, that’s OK. Bad is better than nothing.”

Do market research to predict what your numbers should look like each month and establish a budgeting plan to make sure you’re meeting your benchmarks. “When you’re tripping up somewhere or struggling, it can be hard to know where to start,” says Chulumovich. “A plan helps to pinpoint what needs to be addressed. Measure against the plan and involve your team. Use the talent you have.”

As you build a workforce, simultaneously enlist a group of trusted advisers – even a board – that can offer expert advice about the plan and the general direction of the company. “They can tell you what you’re missing and where there may be opportunities,” says Scissons. “And make sure there are different demographics and diverse voices represented. More options let you better navigate challenges.”

Revisiting the Plan Regularly

It’s not enough to have a plan and then put it into a drawer after the grand opening. Business owners – and their management teams – should be reviewing the plan at least monthly and revising as necessary throughout the company’s lifecycle. It’s a way to course-correct and could even make the difference between surviving and shuttering when a crisis happens.

“You should set up a regular cadence to reviewing the plan,” says Scissons. “It should be monthly. It’s based on predictions for the month and then what actually happened. And make sure you’re diversifying revenue streams.”

Taking the time to do so can give you a playbook in the case of a crisis (and buy you time). As the business grows, you can also have different versions of the plan for various scenarios, everything from quicker-than-expected growth to an unprecedented situation like COVID.

“This is all risk mitigation,” says Chulumovich. “There are regular check-ins with your business that you should do so you can gauge where things fit in place.”

As the company matures, the plan will evolve as well. “You have to think about how to make more money and increase the top line,” he adds. “You may need more analysis and resources, which means more hired guns in marketing and operations. Ask yourself, ‘What can I sell? What’s easiest to sell? How do I get there?’ You need to think about how to get more money in the bank than when you started. During COVID, some companies received government assistance, but not all survived. Everyone needs to plan for rainy days.”

As the business evolves, choose metrics to monitor each month to make sure things are on track, like the number of incoming phone calls, website clicks/traffic and orders received. Then, figure out the action that needs to be taken, whether it’s in marketing, sales, operations or all three.

“You only need to monitor a few metrics,” says Chulumovich. “Have a dashboard that you can analyze once a month. Figure out the drivers of business and profitability. It’s not 50 factors you need to look at; it’s just a few you need to drill down into.”

“It’s OK to have an imperfect plan. Just take five minutes and get started. Even if it’s ugly and full of bad assumptions at the beginning, that’s OK. Bad is better than nothing.”Carolyn Scissons, Finance Learning Lab

At the same time, monitor and analyze your Profit & Loss statements. They offer a snapshot into revenues and expenses during a given time period. This way, you can see where funds are coming from and where they’re going to.

“Go through systematically, line by line, so you know what to do when revenue is down,” says Scissons. “You can find the immediate stopgaps. Look through all expenses and sort them from biggest to smallest so you know what to address first in a crisis. Figure out what’s essential, what you can reduce and what you can delay until later. It’s hard to get creative in panic mode, so determine how you can pivot beforehand.”

The pandemic certainly showed the importance of knowing what to address first in the face of a major crisis. “No one could have envisioned the impact that COVID had,” says Chulumovich. “But it highlighted what people need to monitor and consider, what to cut and when. And it doesn’t have to be during an emergency. How do you stay as lean as possible?”

Determining the Exit

The final phase for any business is the exit, but what that looks like depends on management’s long-term planning. It can be sold to a family member, employee, investor or another company as part of an M&A process, which is heating up in the promo industry these days. Dave Bookbinder, managing director at B. Riley Financial and host of the “Behind the Numbers” podcast, says it’s “a process, not an event,” and that it should start early.

“The sooner owners can do proper planning, the more successful exit they’ll have and the more likely they’ll be to find a buyer that fits with their company culture so they can build their legacy,” he says. “But most people don’t plan, so when they want to or have to sell, they’re in the worst possible spot.”

Many put off planning for the exit because, frankly, they don’t want to think about it. “The business is their baby, and without it, they don’t know what they’d do,” says Bookbinder. “They don’t want to golf all the time, or their spouses don’t want them home every day.”

In this episode of Promo Insiders, ASI Media Executive Editor Sara Lavenduski speaks with valuation expert Dave Bookbinder, managing director at B. Riley Financial, about creating an exit plan and how to get the most value from your business.

But planning for the exit can make all the years of hard work worth it in the end. “The process itself takes about three to five years,” says Scott Snider, president of the Exit Planning Institute in Cleveland. “If you want a buyer to be attracted to your business, with fewer headaches and a better bottom line, you have to think about it from their perspective. They want to see activities that are driving more net profit today and more business in the future.”

Unfortunately, without monitoring a company and knowing how it’s running, owners are often subject to a rude awakening when they want to get their company ready to sell. If an organization is just in the CEO’s head and there’s no shared ownership, that makes it difficult to prepare the firm for the exit or even to figure out what to do in the unforeseen event like incapacitation or death of the owner.

“A lot of people have successful clients and nice cars,” says Snider, “but when they get ready to sell their company, they’re told it’s not scalable or predictable and it’s too owner-dependent.”

Start early planning for the exit, says Patrick Fontana, a partner at Wealth Partners Alliance in Dallas. “It can seem like too much to figure out,” he adds, “but if everything is set up correctly, they’re buying your cash flow. You want systems in place that are repeatable and information that’s easily transferrable.”

At the top of that list is accounting practices and establishing standard procedures from day one. “Buyers want to understand exactly what’s happening,” says Christopher Pegg, director of wealth planning at Brown Wealth Management in San Diego. “You have to have an invoicing process, for example. You can’t just say, ‘We don’t need to track because they always pay on time.’ Also, the owner may expense a lot of things which they wouldn’t do as an employee. That’s OK, but then there’s a lot they have to add back to show profit. When it’s handled early on in the business, at least after the ‘will this work’ phase, the due diligence the buyer wants to do happens much more quickly.”

At least three to five years out from the planned exit, the process should begin in earnest. Bookbinder recommends having a team of advisers, including an attorney, wealth/investment manager and transaction manager, that can oversee the process and position the company properly and legitimately. They should be in place before the exit begins.

“People will say, ‘I can’t afford a real attorney; I’m just going to use my cousin the personal injury lawyer,’” says Bookbinder. “But it needs to be someone experienced in M&A who can paper the deal.”

This is where the business plan, regular monitoring, diversifying and adjusting will pay off in a big way. “Buyers want to see projections,” says Bookbinder. “It gives you more credibility when you have a history of forecasting and things are matching up. It can’t just be pie in the sky. They want to see actual numbers. Your valuation increases by increasing their comfort level. The less adjusting you have to do, the better. On Day 1, you have to remember that there will be an end-game.”

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