Guest post by Jennifer K. Halford, Esq.
Many business owners see the value of having a good business plan when they are trying to obtain financing. Banking institutions and venture capitalists want to see when they can expect a return on their investment. And a business plan can show that information in an organized manner .
But few business owners know the preventative value of a solid business plan.
Creating and regularly updating your plan can help you protect your business from legal liabilities. Taking the time to consider your business goals and how to achieve them will force you to look at risk. It will also help you prevent unnecessary liabilities.
Here are three legal reasons every business owner needs a business plan:
1. It can provide a legal checklist: Starting and growing a business requires many legal documents. You may need licenses and permits. You may need to create a business entity. Your plan should identify the basic legal requirements your business needs to start and to continue to operate.
2. It can help you anticipate legal problems before they arise: Your business plan should identify existing internal and external risk factors for your business. This analysis can help you be proactive in protecting your business. For instance, if you anticipate potential problems in failing to meet production deadlines, you know to include a clause in your client contracts that anticipates such a delay and limits your liability.
Your business plan should also include your goals for growth and expansion. And with growth comes additional legal risks. Again, your plan can help you be proactive in limiting your risk. For instance, your plan may reveal a need to hire employees in the future. Thus, you know to seek the advice of an attorney to create employee contracts, policies, and procedures before you hire.
3. It can help you plan your exit strategy: Transferring ownership in a business includes many legal factors. You may be planning to sell your business. Or your dream may be to leave your business to your children. You need to start planning now to leave your business in the future.
Few business owners take the time to regularly reflect on their business. Having an updated business plan is instrumental to the success of your business. Check out these tips if you need help creating or updating your business plan to make sure you are protecting your business.
Jennifer K. Halford is an attorney whose practice focuses on business law and estate planning. She is also a professor at California State University, Chico, where she teaches Entrepreneurial Law.