Trust the Plan: How to Stop Reopening the Same Financial Worry

Capable, successful owners often lose hours every week to the same question: is it enough? Enough cash, enough saved, enough of a cushion to step back. They run the numbers in their heads late at night, get the same answer they got last month, and start again the next night.

The fix is not more worrying. It is a better plan, and a simple rule: if the facts change, adjust the plan. If the facts have not changed, stop reopening the worry.

Write the plan down

A plan that lives only in an owner’s head can be reopened endlessly. A written plan can be reviewed, tested and then put away. For an owner planning a transition, a useful plan covers:

• What the business needs to earn, and what the owner needs to take out of it, each year until the transition.
• Retirement contributions, savings targets and when they are expected to be reached.
• The likely path out: a sale, a family handoff or a step back to an advisory role, and a rough timeline.
• A cash forecast for the business, so a tight month is visible before it arrives.

Decide in advance what counts as a change

The key is to define, ahead of time, which facts would justify changing the plan. For example: revenue down meaningfully for two quarters in a row, the loss of a major customer, a change in the owner’s health or family needs, a serious offer from a buyer, or a big move in interest rates on the company’s debt.

If one of those happens, reopen the plan and adjust. If none of them has happened, the plan stands, and so does the answer from the last review.

Review on a schedule, not on a feeling

Set a regular review, quarterly works for most owners, and put it on the calendar. Between reviews, the monthly financial statements and the cash forecast are the early warning system. If they look normal, it is safe to stop thinking about it.

Let the routine do the work

The most reassuring financial plans are the most boring ones. Pay a set owner’s salary on a set schedule. Make retirement contributions automatically. Set aside tax payments every month rather than scrambling in April. Every period that routine runs is progress: another paycheck, another contribution, whether or not anyone is watching.

The plan supports the life

A plan is there to support the owner’s life, not consume it. A good one should bring more peace of mind, not another thing to obsess over. If it is not doing that, it is worth a second set of eyes.

Next in the series: Protect the Real Assets.

Mark M. McCormick, CPA is a fractional CFO for food, agriculture and beverage companies, with 35+ years as a controller, CFO and CEO in the industry. More about Mark