Starting a business can be both exhilarating and overwhelming as you put your ideas in motion and work to build a viable enterprise. With so many moving parts to manage, planning your eventual exit can feel like you’re putting the cart before the horse.
In fact, any experienced entrepreneur will tell you that a business plan is an essential first step toward building a successful enterprise. Yet the truth is knowing your end game from the get-go will profoundly influence your business plan. To proceed otherwise would be like selecting your driving route without first determining your destination.
In this sense, it becomes clear that beginning with the end in mind is vital for the success of your business, as well as your personal fulfillment. Once you have a clear vision for your future, your business plan simply becomes a matter of reverse-engineering so that you are clear on the key to success: defining the personal financial purpose of your business.
The Entrepreneurial Journey
Whether you want to be your own boss, build meaningful wealth, or cement your legacy, the reasons for starting a business are as varied as the businesses themselves. But identifying your motivations for becoming an entrepreneur isn’t the same as setting a clear intention for your business.
A better question to ask yourself may be, “What do I want my business to do for me?”
Possible answers to this question may include:
- “I want my business to provide a steady source of income for me and my family.”
- “I want my business to be an asset that I can sell to fund my retirement.”
- “I want to create a lasting business that I can transfer to the next generation.”
Your answer serves as your North Star for decision-making, as well as the foundation for your exit strategy.
By beginning with the end in mind, you can identify the necessary steps to achieve your desired outcome and allocate your resources accordingly. This provides the basis for a business plan that inspires confidence and sets you on the path to success.
Applying the 3Rs Framework
Beyond a business plan and exit strategy, every successful business owner needs a decision-making framework to build liquid, sustainable wealth and ultimately achieve financial independence. At CornerCap, we call this framework the 3 Rs: Reward, Reinvest, and Repurpose.
More specifically, every dollar your business generates can be used to:
- Reward yourself with a paycheck.
- Reinvest in business operations.
- Repurpose into an outside investment.
But how do you know how to allocate your earnings among each of the 3 Rs so you can achieve your goals? Begin with the end in mind.
When you know what you ultimately want from your business, you can develop a plan for managing your operations and finances accordingly.
Building on the examples above, here’s how the 3Rs framework may work in practice:
Example 1: “I want my business to provide a steady source of income for me and my family.”
In this case, you may allocate more to the Reward bucket, so you can collect a regular paycheck. Meanwhile, reinvesting in your business can help stabilize and grow your income source, whereas repurposing a portion of your earnings into outside investments can provide a safety net in case your business experiences a setback.
Example 2: “I want my business to be an asset that I can sell to fund my retirement.”
If your goal is to eventually sell your business, you may focus on Reinvesting and Repurposing. Reinvesting in your business can increase its value, which can lead to a higher selling price when you’re ready to exit. In some cases, you may need to rely on outside financing to achieve your valuation and eventual selling price goals. At the same time, repurposing some of your income into a diversified investment portfolio can help supplement your retirement funds while reducing the risk of having all your wealth tied to your business.
Example 3: “I want to create a lasting business that I can transfer to the next generation.”
If you want your business to endure for generations, you may focus on Reinvesting to ensure its long-term success and sustainability. Like the above example, you may also need to source outside funding to scale and grow to your ideal level. Meanwhile, repurposing a portion of your income can help you build generational wealth, thus contributing to your legacy beyond the business itself.
A Roadmap for the Future
At CornerCap, we often encounter “directionless entrepreneurs,” those who are investing heavily in their business emotionally and time-wise, but who don’t have a clear definition of what financial purpose the business serves in their life. Without a clear intention for your business, it’s exceedingly difficult to achieve success or feel fulfilled by the work you do each day.
On the other hand, knowing what you want from your business can help you define your role as business owner, allocate resources more effectively, and make decisions that drive you closer to your end-goal. In addition, you’ll likely experience fewer “coincidences” in your business and begin to connect the dots between cause and effect. This new sense of awareness will make it easier to find the answers you need when challenges and opportunities arise.
We’ve seen these pieces fall into place time and again. No matter where you are in your entrepreneurial journey, setting an intention for your business can help you operate with newfound clarity and purpose and make more informed decisions for your future.
An experienced wealth advisor like CornerCap can help you develop an exit plan based on your values and financial goals. Together, let’s chart a course toward your ideal future.