We perpetually focus on the financial aspects of business, but practically business should achieve three aims, mind freedom, time freedom and financial freedom, there is no right or wrong aim as a priority but for a lot of business owners we see survival as being the critical part, and as we undertake the business planning process, eyes are open to answering the less financial questions, understanding that a business needs to give more than just a financial return.
We ask why are you in business, for a lot of business owners this is a question that they struggle to answer, as they are working just in their business every day, they are not stepping back, understanding their business and articulating what they want from their business. It is often this first question that is the hardest to answer, why are you doing it?
Understanding the intangibles
Firstly, an intangible is a non-financial measure in a business, and it is often not as simple as simply saying having flexibility or being able to be less stressed than in the work environment, but what does this actually mean?
We measure our success in business by profits, but a question that we often ask is how much is enough, or what are you wanting from the business if you are spending the majority of your time in the business and missing out on family time or being able to mentally switch off, then is this an acceptable outcome for measuring success. A business owner has not just made the decision to start their own business merely for a financial outcome, they could achieve the same things through working full time, picking up some extra shifts, and in a lot of cases then being less stressed and often more financially better off than running their own business.
So we break the intangible into three basic measures; time freedom, mind freedom and financial freedom, practically speaking there is an element of the profitability of the underlying business that impacts the ability to achieve these, but at the same time we use these as measures for finding success in business.
1. Time Freedom
Time is one commodity that is limited and cannot be replaced, for many business owners having time to do things is often a luxury that is often overlooked or replaced with the “I will just do it myself”. In the context of the business planning process, however, it is critical. Ask yourself can someone else do the task that only you can complete?
The development of the business plan looks at the systemisation or more articulately what can occur to replace you in the business. Is there a platform that can help you reduce your number of hours in the business, or is there an option that would allow time away from the business, where it is not dominating your time?
Understanding time as a measure of your business plan is critical for getting more out of your business. Finding what is important, and what can be systemised, outsourced or delegated will give you more time to find a balance. We, therefore, consider this a core element of the business planning process, a key measure of not only a goal or objective but also what can be achieved from the business in an intangible capacity.
2. Mind Freedom
Stress and the stresses of running a business can be tough, and it is often overlooked that behind the business there are people, and often people who are fully invested in their business. Mind freedom is the ability to shut the doors at the end of the day and relax, to be able to walk away from the business and have a detachment which allows you to feel contentment from the business.
We often argue that the core concern for business owners is money but if we explore this further there is a lot more to it, there are managing staff considerations, keeping clients and customers happy, growing the business, managing the cash flow and ensuring that things are running well. It is therefore a major goal of a business plan to ensure that the business provides a level of mental freedom and that the owner is able to step away from the business and know that it will be still there the next day.
Another intangible but one that is equally valid as the financial considerations, and where we are undertaking a business plan, we find that identifying what is causing stress is often core in the development of the plan, finding outcomes that can reduce the stress and give the owner back some mind freedom.
3. Financial Freedom
We look to profits but financial freedom is different to this. Profitability is a key component of the business measure but it is not the only one that we are striving to achieve. Business owners often invest everything into their business which means that they are completely exposed to the success of the business, but financial freedom allows the owner to not only have wealth away from the business but also the ability to have a map to be able to leave the business in the future.
In developing the business plan, we are therefore working on the individual financial goals for the business owner as well, this business is only a component of their overall financial position and developing a business plan that aligns with the wider goal is critical. We step back as part of the business planning process and ask what are we trying to achieve from the business on a financial basis and then align this with the overall business goals.
Balancing Intangibles against Tangibles
The intangibles, or those measures which are not necessarily financial alone need to be a part of the business planning process. We determine these in the goal-setting discussion, asking what we are doing and why. All too often the business goals are simply a profit measure or a turnover measure but they do not look at the underlying considerations to be able to align the intangible goals with the financial goals.
An example of this is a business owner wanting an afternoon off each week to attend kid’s sports. There is no financial measure that could align with this, so it is a case of finding a different way of looking at it, whether it is training staff to manage the business in their absence, cutting the work hours of the business, or maybe implementing a different human resources policy.
It comes down to what is important for the business owner, and then making this a priority in the development of the business goals, it is determining that there are some measures that are simply not financial but rather a reflection of the wants and needs of the business owner. These should not be discounted simply because they are not financial, but rather should be prioritised in the same way that we are prioritising the financial measures of the business.
Business planning away from the numbers
Finding appropriate measures at first can be difficult but once we understand the needs and goals the business plan can be adapted to address these. To give these a priority and to ensure that they are simple to measure and a plan made to achieve them.
Articulating the objectives and goals steps away from the finances and requires the business owner to ask themselves some additional questions as to what they need and what they want. It is refining it to some core objectives and then providing a matrix around these, to find solutions to assist us in achieving them and then ultimately providing a reward once they are achieved.
For the business owner who is struggling to switch off, it might be as simple as having time to watch the Friday night football, rather than working on their books, this is not a financial consideration, but achieving it may have a small impact on the financial position, so there is a trade-off in the business planning process and outcome, between the financials of the business and the needs of the owner.
This business planning process places an emphasis on the freedoms that the business should give us as opposed to simply the financial.
Aligning leadership with outcomes, how do we measure our business leadership?
For business owners everything is profit, except when it isn’t.
1. Leadership vision
A business leader needs to have a balance, Finances are merely only one measure of success and if they are trading their freedoms for financial outcomes are they actually performing well or merely surviving? A good leader will elevate non-financial needs to a similar platform to the financial.
2. Company culture
There is a lot talk of company culture but what does it actually mean? If staff are making money but not enjoying their work, is there a disconnect which in the longer term will damage the business? We find that successful businesses and business leaders have elevated their freedoms to be as important as their finances, and it brings their team along with them.
When we first work with a business we visit a few days before and ask around, the morale of a business is critical. If there is a lack of enjoyment within the working environment we can guarantee that there is no alignment of the team members with the business goals (at least the non-financial goals). A great leader, elevating non-financial concerns will ultimately develop a happier team, one that is growing, achieving and generally more successful.
4. Finding the right mix
There is no discounting of the value of financial matrix but rather an acknowledgement that they cannot be considered in a vacuum, exploring private equity buyouts of business, the reason so few are successful is that the only measure is a sale, how much money can be pulled out. There is limited investment in the culture, the morale and the staff in general. The goals are very linear and do not consider the freedoms that the business owner is ultimately striving for.
Ethics and Business Planning
A question arises is can a business be moral or ethical, a better question is can a business afford not to act ethically.
1. Ethical consumerism
In the wider context of the end user, there is an expectation that a business will act not only for its financial good but the good of all stakeholders. In developing our business goals, it is critical that we consider what should be ethical conduct, as the short-term benefit of an unethical approach will not only damage the business in the long term but is also a harbinger of a business that will fail to meet not only financial objectives in the long term but also to provide the expectations of the owners.
2. Is there a place for ethics in business?
Ethics are critical for business and there is no place for an unethical business. Alignment of the freedoms of the business ownership within the context of the business planning process puts an inherent value on the need to act ethically, to make sure that our decisions are not simply financial but have wider considerations.
What it all means
Fundamentally a business becomes a more part of a business owners life and personality, it is therefore critical that the business outcome align with those of the business owner, to give them something other than simple financial outcomes. The business owner, in the planning process, needs to strive to find what else brings them into the business environment, what brings them contentment, and it is arguable that from this point forward it should result in a better business overall.
Business is not linear, nor is it stagnant, a business owner who is achieving both tangible and intangible outcomes from their business is more likely to be invested emotionally into their business, to improve it, and to ensure that it continues to thrive and grow. A business owner who is out of love with their business will struggle to achieve long-term, as the business is merely a means to an end, and often a lack of alignment will mean that the business is stagnant and struggles to survive.
For business owners, the planning process therefore needs to focus not just on the finances but also those other things that the business should bring, time, mind and financial freedom. A sense of enjoyment in the business and a sense of achievement and community which aligns with the business owner. Building the business plan in this context further means that it is heavily reliant on the establishment of goals, articulating outcomes and ultimately ensuring that the business provides this.