Benchmarking Your Business for Growth
Want to position your business for growth? Tune in here to learn more.
(Video is 4 minutes. The full transcript is below.)
Full Transcript of video
Hey friends, the Fearless Advisor here. Today I am going to discuss how to benchmark your business for growth.
Building and running a business requires many different skill sets. And business owners are a different breed. You're often the head of sales, chief strategist, head of marketing, client service, and more.
But when it comes to the long-term, stepping back from the day-to-day and looking at your business holistically can be valuable. A lot of times, we ask clients – what do you want to get out of your business?
Whether it’s a sale down the road, family succession, or you just want to grow as fast as you can now, taking an outsider’s viewpoint can help.
Let’s review the two critical questions we focus on to ensure business owners are optimizing their efforts.
Question 1: Do You Have the Right Structure?
Determining your business structure is usually about taxes, liability, and protection for your family.
There are four types of usual structures:
• Sole proprietorship
• C Corp
• S Corp
Which one you choose is all about what you want for the future of your business.
Sole proprietorships can be beneficial, but business assets and liabilities are not independent of your personal assets and liabilities. These are usually for freelancers, creators, or a small business with one employee.
An LLC, which is usually owned by multiple owners, or members. This is likely the most common type of business. Profits are divided among its owners and reported on their tax returns, but generally liabilities are separated from personal assets.
Corporations, C Corp or S Corp, have a completely independent life separate from their shareholders.
Corporations can be a good choice for medium- or higher-risk businesses. They are great for raising capital or if the plan is to become public or be sold eventually.
The main difference between an S and C Corp is that an S Corp’s shareholders report the flow-through of income and losses on their personal tax returns and are assessed tax at their individual income tax rates. This allows S corporations to avoid double taxation on the corporate income.
When determining your business structure, or potentially changing it, it’s critical to determine your future path and what you want over the years.
Question 2: How are You Establishing a Plan for the Future?
When we work with business owners, we first arrange to assess the business as it is.
Then we go through an exercise to discover what the business owner needs. This is thinking about what you want to get out of the business once you’re no longer involved day-to-day. Whether it’s a sale, or remaining involved, we help you come up with the number you need to retire successfully.
Then we back into a way to create that value in the business over time. This means thinking through the goal for each area and then identifying strategies and tactics that can get there.
Some of these involve hiring additional talent, deciding between purchasing or leasing premises and equipment, or outsourcing roles or functions.
Some of the things we look at are:
• Getting your books in good shape
• Improving cash flow by reducing expenditures and considering leasing
• Increasing profitability by improving margin from both cost and revenue
• Lowering risk by diversifying revenue streams and creating recurring revenue
• Streamlining operations, including inventory management, payroll control, etc.
• Attracting and retaining high-quality talent with qualified retirement plans, cash balance plans, or stock plans
• Building or refreshing your sales and marketing process
Taking a step back from the daily grind and getting perspective on where you are adding value or coming up short can be an excellent way to ensure you are tracking your goals.
Working with an outside "sounding board" that has experience with business financial planning and has your personal wealth goals in mind can bring things together and help you create a plan.
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