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How to Develop a Succession Plan

How to Build a Strong Foundation for Your Small Business

Even a sole proprietorship needs a business plan. Being self-employed or running a small business on your own can be very rewarding, but only if you take it seriously. Owning your business isn’t a hobby. If you quit your job and started your own business, it’s your means of livelihood. Follow these steps to form a strong business foundation and to separate your work and personal lives:

  • Separate your business life from your personal life. Set up a designated workspace with professional surroundings. Establish working hours that ensure personal time where business issues don’t encroach on free time and family time. And, by all means, separate your home and business finances by establishing bank accounts to handle your business funds.

  • Pay yourself. Pricing your services will help you focus on how much you want to earn and how to price your services to achieve your income objective.

  • Reward yourself with praise, raises, bonuses, and retirement savings. Some self-employed businesspeople tie their rewards to their business goals and objectives. If, say, you reach one of your more ambitious goals, give yourself a cash bonus out of the business profits. This strategy may sound a little silly — it’s your own money, after all, but many freelancers and independent contractors say that these kinds of incentives are key to staying focused and on track.

  • Review your performance. Judge your performance against business goals and objectives. Make sure you involve your clients. That is, following major projects, discuss their satisfaction levels as a way to monitor how you and your business are performing.

  • Implement your business plan. Getting absorbed by day-to-day business needs — whether collecting an unpaid bill or addressing a looming client issue — is easy to do. If you’re not careful, you’ll be so busy serving clients that you’ll forget to run your own business. That’s where your business plan can rescue you, keeping you focused on your goals and objectives and the deadlines of your action plan.

  • Set money aside in case work slows down or a client doesn’t pay on time. Decide how much money is enough to carry you through a month, two months, six months, or whatever. Then build up a cash reserve — not in a personal bank account but in a business savings account where you’re not likely to raid the money around the holidays or vacation time. We can’t stress this point enough, especially during tough times. An adequate cash reserve can mean the difference between weathering a rough stretch and going bankrupt.

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