I speak to a wide range of business owners every day. I find that there is a very strong correlation between those who plan and set goals and those who are successful. Those who are successful have usually sat down, had a good think about their life and made a plan with the following:
- What do you want to do with your life (easier said than done - however this is just a plan - to steal a phrase from my friends in the startup community - there will be many 'pivots' along the way)
- From a financial perspective, quantify this into cash outflows at particular points of time (buy a house, buy an investment property, buy shares, school fees, deposit for children's house (thanks Malcolm Turnbull), go on holidays, retire and have a passive income stream, give money away to family / charity etc)
- Determine your current financial position (Assets, Liabilities and Net Worth)
- Determine your level of income and your level of base ongoing expenditure
- Put this into a financial model (if you regularly read my articles you knew it was going to come back to Excel!) to determine whether your current trajectory will lead you to live the life that you desire
- If it does, great - if you have excess funds than you can consider lower risk investments to decrease the variability of outcomes
- If it does not, review the plan to determine how to make the business perform better to allow you to lead you to live the life that you desire
Per the first point, this is not a set and forget process. This should be updated every 6 months and whenever a major life event occurs (marriage, divorce, birth, death etc).
This also breaks the large goals down into small ones (e.g. I plan to increase my offset balance by $20K this year) which are much more achievable, it allows you to recognise and celebrate success along the way, and doesn't make the large goal as daunting.
There are a large number of facets to this process, all of which you may not have the required skills to do on your own (taxation, long term strategic business planning, risk planning, legal matters, succession planning matters, investing etc). I think that every single business owner in Australia should have one of these plans. If you are a business owner and you do not have a plan like this, the below quote comes to mind:
"Failing to plan is planning to fail"
What are your thoughts? Are you a business owner? Do you have or desire a plan like this?
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