Building Your Business: 15 Rules To Follow For Successful Business Owners 

Building a business is perhaps the most difficult yet rewarding process you can go through. 

That’s because so much goes into building a business – from what’s obvious to what’s beneath the surface. 

Here at Consolidated Planning, we want to help you realize the full value of your life’s work by adequately protecting, growing, and exiting your business. We adhere to these rules as we guide owners like you to a more productive and more sure future.

The best way to do this is to follow our process. In this article, we’ll delve into how to protect your business, prioritize your people, grow your business, and work to optimize cash flow and optimize your overall business value. 

Your People Are Your Business 

Read that again. Your people ARE your business. Strategy is important, but ultimately the right people drive the right strategy. And if you don’t reflect that as a business owner, your business and its value could be in jeopardy. 

#1 Competitive Compensation And Benefits 

A business’ greatest assets are not buildings, machinery or equipment; they are its people.  Therefore, it’s critical for business owners to provide compensation and benefit solutions that produce a loyal workforce with an ownership mindset. This means they are less likely to leave, more likely to strive to produce quality work and results, allowing you to reap that benefit. 

#2 Offer More Than Just Products 

Benefits are more than just products. Access to individualized services and  education opportunities leave employees feeling nurtured; improving their bottom line and yours. 

#3 Retention Plans Versus Incentives 

Retention Plans and Incentives are not one in the same.  

Retention incentives are long-term and designed to keep an employee from willfully leaving the company for a set amount of time – allowing you to find security and continuity in your workforce. So, what is a retention plan? The best retention incentives provide an economic benefit that is: 

• Completely deferred
• Substantial in nature 
• Financial, but also an emotional want or need of the employee, and 
• Designed so the company can recapture cost 

A good retention plan might be aimed at profit targets or another important business metric. Importantly, retention plans don’t way out as they are earned. For instance, an amount earned today might require vesting for 5 or more years before an employee could receive it.  This creates what are known as ‘golden handcuffs’ to keep the employee in place.   

Performance incentives are short-term, and designed to align employee behavior with company goals – helping you to reach your goals. Most traditional incentive plans do not provide retention power beyond 12 months. These may include: 

• Cash Bonuses 
• 401(k)s including Matches
• Fringe Benefits, and more

Don’t get us wrong, these are great benefits and provide a lot of value but they are just that…benefits. 

At the end of the day your employees want to be recognized and paid their value. The right retention plan brings that to fruition and helps you grow your business. 

#4 Retention Benefits To Outlast Your Ownership 

Moreover, the retention benefits you’re offering are ideally structured to outlast your presence as the owner.  This may not always be possible, but should be the initial aim of any well-designed retention strategy.   

Because you want to ultimately exit your business, establishing that your key employees will likely be retained past your exit establishes business value to your buyer.

Protecting Your Business, Just Like You Protect Your Home 

Once you’ve started building your business, it’s wise to protect it. Protection first means protecting your future cash flow and business value from unexpected circumstances. And believe us, there is always something when it comes to being a business owner. 

Think about all of the other assets in your life that you protect. Your home, your cars, jewelry, and maybe even ‘stuff’ beyond that. Yet, the most important asset that you own is probably your business.   

#5 Life And Disability Insurance to Protect the Profit and Value of the Business 

As a business owner who is involved in the day to day of your operation, what happens to your earnings if you suddenly were unable to show up, especially for a long period of time? Scary to think about, isn’t it? 

For this reason, life and disability insurance for a business owner is necessary to protect the profit and value of your business. This might be in the form of disability overhead insurance, protecting your income from the business, or even the businesses total value. 

#6 A Buy/Sell Agreement, or Buy/Sell Language In Your Shareholder Agreement 

A well written AND adequately funded Buy/Sell Agreement is a requirement for any successful business. This agreement helps ensure that all parties involved receive the full value of the business asset in the future. Failing to protect your largest asset, the worth of your business today is not the same value without you in the event of a sudden or involuntary departure. 

You can ensure your life’s work and the value it represents with four Buy/Sell Agreement options: 

• Cross Purchase – For two or more owners. Each owner buys out the owner that is impacted by a death or disability. This is a tax effective method, but the method is quite complicated with three or more owners and/or with varying ownership amounts.   
• Entity Purchase – For two or more owners.  This is also called a ‘stock redemption’ agreement, and it’s a simple and effective method. The business buys out the impacted shareholder, redeems shares, and thereby has less shares outstanding.  The remaining shares therefore increase in value. The downside is what happens to the surviving owner’s tax basis. 
• Special Purpose LLC – For two or more owners. What you use if there is a big disparity with the age of each owner, or insurability, or amount owed. 
• Unilateral – What you use if you’re the only owner of your business. 

By implementing the right Buy/Sell Agreement, your business remains part of your balance sheet for the well-being of your family, business partners, and employees. 

#7 Adequate Life Insurance to Protect the Business Value, and Payoff Business Obligations 

In the event of your death, adequate life insurance further protects your business. If debt exists on the business balance sheet, an amount of life insurance equal to the outstanding balances of any leases or loans should be purchased to reduce the ongoing cash flow pressure that will be present in the event of an owner’s death.  

Unresolved cash flow pressure will just create turmoil for wherever your business stock is being transferred to. 

#8 Key Person Insurance 

Losing a key person, for any reason, can drastically affect your business. Key person insurance is essential for your key employees whose departure would adversely affect your business – productivity, revenue, client relationships, etc.  

Key person insurance should be implemented to protect the business in the event of an unexpected death. 

If the insured key person passes away or becomes unable to work due to a covered event, the key person insurance policy pays out a death or disability benefit to the business. The funds received from this benefit can be used to cover various expenses, including: 

• Hiring and training a replacement 
• Compensating for lost profits 
• Paying off debts, or 
• Providing a financial cushion during the transitional period. 

Grow With The End In Mind 

#9 Look Towards Your Exit Strategy 

All roads lead to Exit Planning. Or at least they should. One day you will either transfer your ownership to someone else, or die with the business value on your balance sheet. While this planning should start 5 to 7 years before your exit, the sooner you begin, the better all aspects of your exit will flow. 

#10 Know Your Post-Sale Income Requirements 

Before your exit plan can even be sufficiently structured, you must know your post-sale income requirements. How will you derive income after the sale of your business? And is that income enough?  

Oftentimes business owners discover that income simply isn’t enough compared to their income derived from OWNING the business. 

Determining the cash flow necessary to support your post-ownership lifestyle is the first step in developing an exit strategy that’s right for your unique lifestyle and goals. From here, you can either move forward in your plans OR work to maximize your business value by preparing for the sale in a few ways. 

#11 Formalize Your Succession Plan 

A succession plan should be formalized to dictate how, when, and to whom the business will be transferred at your retirement. This plan should coordinate seamlessly with the other components of the Buy/Sell Agreement that is right for your business. 

#12 Know Your Business Value 

An independent business valuation should be performed regularly. Yes, regularly. Just like you might check the estimated value of your home on Zillow. We all do it. 

Gone are the days where you don’t know the value of your business until you receive an offer. And it’s easier than ever to have this knowledge at your fingertips with the use of tools like BizEquity. The valuation of your business equips you for the eventual sale of your business. 

Furthermore, the Buy/Sell Agreement should reflect any notable changes in that valuation. 

Optimize Your Cash Flow 

Everything in your business, and personal life, is rooted in cash flow. It IS. 

#13 Direct Cash Flows 

A portion of your business cash flow should be directed to increasing net value through systematic quarterly savings: 15% from W2 earnings and 15% from all business distributions. 

#14 Build Liquidity 

Your investment allocations should offset business risk with a portion of business assets providing enough liquidity to cover dangers and opportunities that you might run into as a business owner. How much is enough? 

That is different for every owner, and we find that so long as a business owner can earn an inflation-beating return with their cash equivalents they’d rather maximize this as a store of wealth. 

#15 Liabilities Shouldn’t Tie Up Cash Flow 

Business liabilities should be flexible in nature, and collateralized by other assets and insurance.  Furthermore, they should not consume large amounts of cash flow in order to be maintained. 

You’ll need this cash flow should anything unexpected come your way. 

Increase Your Business Value By Implementing These Rules 

Regardless of where you are in your business owner journey, you should always be wondering, “What can I do to build value in my business?” 

Though many factors affect your business and its value, these four things are paramount in building your business most effectively: 

• Retaining your employees
• Protecting your business 
• Understanding your post-sale income requirements, and 
• Optimizing your cash flow 

To understand how you can implement these rules and begin considering the sale of your business, talk with an experienced planning professional at Consolidated Planning.

2024-168456 Exp. 1/2026

Guardian, its subsidiaries, agents and employees do not provide tax, legal, or accounting advice. Consult your tax, legal, or accounting professional regarding your individual situation. The information provided is based on our general understanding of the subject matter discussed and is for informational purposes only.  

This material contains the current opinions of Andy Brincefield and Consolidated Planning only. These are not the opinions of Park Avenue Securities, Guardian, or its subsidiaries.