What IS a business plan?

For Business Owners ONLY

This week we’ve been discussing business plan tools and the questions they answer. Lots of great information, for sure, but what’s the SIMPLE answer to “What is a business plan?”

Simply, a business plan is a forward-looking document that helps our business achieve its medium- and long-term goals.

A full business plan should answer all 4 questions that we’ve covered this week:

• How will we make money?

• How will we continue to protect our ability to make money?

• What must we do to achieve our goals?

• How will we afford to make it all happen?

The contents of the business plan depend on how it will be used, and this depends on the intended audience:

A lender wants to know that we can repay their loan with interest. The numbers – the cash flow statement – is key to them. They also want to understand the assumptions that created the cash flow. They want to read our story – the narrative – behind the numbers.

An investor is usually interested in growth and exit because they want a VERY healthy return on their investment. Can we quickly grow our venture? Can we then sell it in three or five years? The business model helps them make investment decisions very quickly: does our business have high margins that are scaleable? How will we reach our intended market and convince them to buy?

Staff want to know what they need to do and by when. So project plans are super helpful. But staff also respond very well to the strategic stuff. What is our long-term direction? What are the key over-arching things I should keep in mind as I do my job?

Management (you and me) are interested in all of it. We probably won’t create very formal documents unless we’re speaking with a lender or investor. But going through the process, and creating some kind of documentation is important. Helps us think. Helps us share our thinking. And helps us manage.

In their simplest forms, each of the four questions can be reduced to a single page: a business model canvas is a great overview. A strategy map tells a very clear story about our company’s medium-term focus. A Gantt chart breaks things down into projects and tasks, deadlines and responsibilities. And a six-month monthly cash flow projection avoids nasty surprises. These are the arrows in our management quiver…

…which are only useful if we use them. They must be referred to regularly – weekly – to check our progress. Hold the team accountable. Adjust, as necessary. And then, every three months, revisit and update to ensure that they reflect our new reality.

This review, this updating, this accountability: THIS is management and it is THE most important part of the business planning process.

I hope this has been helpful…

…and if you’d like to learn more, including seeing live examples of some great planning tools, please join me in one of my live, online sessions on January 19.

Join me on January 19 for a free 60 minute live training on business planning.
Woo hoo! 🙂
Two times to choose from:

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What Kind of Business Plan Do I Need?

For Business Owners Only

Yesterday we learned that business owners do “business planning” because they’re trying to answer one of 4 fundamental questions. Today, let’s look at the 4 types of planning tools that answer those questions.

1. A BUSINESS MODEL helps us understand if what we’re doing makes business sense.
Simply, a business model tells us if we’re going to make money.

“I buy pencils for one dollar and sell them for seventy cents.”

“It costs us $100 to acquire a new customer who will pay us $700 in the first year. It costs us $300 to deliver one year of service. Our overhead costs us about $200 a year for each customer.”

Understanding a business model is powerful. It can prevent a new business from starting, as in the first example. It validates when we’re doing something right (the second example). It serves as the basis for focused improvement: “Becoming 10% more efficient at service delivery will generate an additional $30 gross profit per customer.”

Business models are often taught to startups as a way to assess whether a business idea is worth pursuing. But being able to sketch out a business model is a very useful tool for a business owner at any stage. Owners can quickly highlight ways to fine-tune a business, point out potential difficulties, and even uncover new business opportunities.

Business models can be quickly sketched on paper, or created with several purpose-built software products, several of them free. Google “business model canvas” to find templates and software.

Interestingly, a business model diagram (or “canvas”) is now the first thing some investors want to see.

2. A STRATEGIC PLAN discusses differentiation over the long-term.
A business strategy tells how a company will generate value in a way nobody else can.

A strategic plan answers, “Who are we important to?”, “Why?”, and “How will we stay important to them?”

It tells us how we will create a unique and valued space in the market, and then defend that space against all comers.

It is concerned with the medium- and long-term. It tells us to focus on certain key things, to become better than anybody else at those things, and to ignore everything else.

A strategic plan has traditionally been the tool of large consulting firms and larger companies. These firms have enormous momentum, and require long timeframes and significant investments to alter course.

Smaller firms benefit from this type of thinking, too. Having customers that perceive our offerings as unique and valuable is necessary for long-term success. Achieving this takes insight, focus and discipline.

How will YOU create unique, valued and defendable offerings?

3. A PROJECT PLAN helps us get things done.
All the high-falutin’ thinking in the world has zero value unless we can execute.

Successful business owners break their goals down into bite-sized pieces: projects and tasks. They let their team know who’s responsible for what. They communicate expectations such as completion dates. They use metrics to monitor progress along the way.

Project plans range from very detailed and formal to casual and dynamic. Traditional approaches use paper and linear models; modern approaches use software that supports a fluid, organic model.

Regardless of the approach, a project plan tells the team who needs to do what by when.

4. A CASH FLOW PROJECTION tells us if we have sufficient fuel for the journey.
Can we afford to get from here to there?

A cash flow projection is the most potent (and underused) arrow in the business owner’s quiver. It points out ahead of time when we may not have enough money to pay our bills. It tells us if we can afford to invest money in equipment or marketing or expansion.

Further, it helps us fine-tune our operations, to squeeze more juice from the orange.

Even further, it shows us where to invest excess cash in our business to accelerate growth and profit.

A cash flow projection is required by virtually every lender and most investors. It doesn’t guarantee that their loan or investment will be repaid. But it does demonstrate that the business owner has at least thought about it, and is sophisticated enough to warrant their consideration.

After all, isn’t business about making money? Or, at the very least, about not running out of money?

Let’s bring these pieces together…

…in tomorrow’s post. How can we most effectively use these 4 planning tools? And, finally, just what IS a business plan?

Join me on January 19 for a free 60 minute live training on business planning.
Woo hoo! 🙂
Two times to choose from:

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Is Business Planning Bull-Oney?

For Business Owners Only

Lots of response to my 10/10/10 business planning approach and my own 2017 strategic plan. No middle-of-the-roaders on this topic! People either love this stuff or get angry about it. Why is that?

Neil Tuckwell, an Australian consultant, pointed out that there’s still no consistency in business plan terms and approaches. “Business plan” means different things to big firms, to small firms, and to startups. Some industries (high tech, in particular) even argue against business plans and business planning.

So where does that leave us? Are business plans crap? Is business planning bull-oney?

It depends on the question we’re trying to answer

We business owners need to think about our businesses. A lot. How is it doing? Where is it going? How is it going to get there? This thinking is what business planning is all about.

And the planning approach we use depends on which of these 4 key questions we’re trying to answer:

1. Does what we’re doing make business sense?
This is the key question that startups need to answer as they work to discover their business model.

And not only startups. This is a good exercise for any of us to go through. Not only does it answer the question YES or NO, but it can highlight a weakness that needs to be shored up, or a strength that we can capitalize on.

What if we could tune up a little here, and polish a little there, and add 10% to our gross margin?

2. How do we (continue to) differentiate ourselves?
Business success rests on uniqueness in some way. Having a product nobody else has. Delivering a service that the competition can’t match. Having a secret process, a special sauce, a perfect location, an amazing marketing approach. Something that attracts customers, frustrates competitors, and strengthens margins.

And once we have this uniqueness, how do we keep it, strengthen it, protect it?

This question should be in the mind of every business owner. Healthy businesses work out the answer and place it at the center of everything they do.

Imagine having a better, higher-margin mousetrap that customers love buying!

3. How will we achieve our goals?
What projects and tasks do we need to do? Who’s going to do them? By when? How will we track our progress?

Business owners need to create direction and accountability. Structure and process. This is the essence of management, and fundamental to any medium- and long-term success.

These are the steps in our 1,000 mile journey of business ownership.

4. Can we afford to get there?
Ah, yes, better make sure not to run out of cash between here and there…

We know we need to create a cash flow projection for the banker when we’re seeking financing. But what about for ourselves? Isn’t it important to keep a close eye on our cash all the time?

Of course it is. And businesses that do, out-perform their peers by miles.

These four key questions determine what kind of “business planning” needs to be done. In my next post, let’s explore the four types of business planning that match these questions.

Join me on January 19 for a free 60 minute live course. Two times to choose from:

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How to Use Your 10/10/10 Business Plan to Make Decisions [HINT: FREE ONLINE WORKSHEET]

For Business Owners Only

We’ve been exploring the 10/10/10 Business Plan which I created for those who hate or mistrust business planning. In just 10 minutes a day for three days we’ve explored our company’s aspirations, threats and opportunities, and strengths and weaknesses.

If you’ve reached this point, congratulations! You’ve thought through your business, and you should have already realized some good insights.

But I think there’s more we could do, don’t you?

The problem with writing things on paper is that it’s tough to really dig into the information. Paper notes don’t help us do deeper analysis, and they certainly don’t help us do it quickly.

Wouldn’t it be awesome if we could instantly answer the following critical questions using information we’ve just recorded?

  1. What things could we do quickly and inexpensively?
  2. What things are potential game changers?
  3. What items carry the greatest risk?
  4. What items don’t support our aspirations?
  5. What could we get done fastest?
  6. What could we get done cheapest?
  7. Which items have been assigned to Sam?
  8. Which high risk items have been assigned to Pat?

Awesome? It would be AMAZING!

I’ve created a terrific online worksheet that is free for you to use. Simply plug in the information you wrote down, and you can instantly answer all of the above questions, and more.

Go here to see a short video demonstration, get the complete workbook, and get your copy of the 10/10/10 Business Planning Worksheet. All with my compliments.

So that next time somebody asks you about business planning, you can tell them that you LOVE doing it!

CLICK HERE to get all the 101010 Business Planning resources.

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Business Planning in 30 Minutes, Part 3

For Business Owners Only

Do you hate business planning more than hearing nails on a blackboard? Perfect. Join the rest of us business owners as we search for a better way…

In part 1 and part 2 of this series, we looked at the 10/10/10 business plan. Think about one aspect of your business for 10 minutes. Do this for three days. Voila! Business plan!

So far, we’ve written two sentences that describe our business’s aspirations, and we’ve thought about the OUTSIDE forces that could significantly affect us.

Now onto the last bit: let’s think about our capabilities, those things within our direct control, typically things that are INSIDE the company. This worksheet is a good guide.


What are our strengths? Those things that our customers rely on, things that our competitors aren’t as good at. They could be people, skills, knowledge, procedures, equipment, location, technology – you know what they are. They make us proud of our business, they’re the things we like to talk (brag!) about. And they keep our customers coming back for more.

Ready to do a little more writing?

What should we do to preserve our strengths and capitalize on them? How can we make them even better, even stronger, even more effective? How can we use them to increase our reach, our revenue, our gross margin, our customer satisfaction?

Describe these things at a high level. Perhaps you teach business owners using the Internet – just a random example 🙂  What about using a cool new technology to help ANY business owner, ANYWHERE, in a LIVE public setting? Let’s write it down:

Use the CZ technology to offer free, online advice to business owners around the world.

By achieving this, how much will your business measurably improve? Circle one: Lots  Little

How much money / effort will it take to achieve this? Circle one: Lots  Little

How much time will it take to achieve this? Circle one: Weeks  Months

How certain are you that this can be achieved? Circle one: Very  Unsure

Is this consistent with your corporate aspiration? Circle one: Yes  No

Who from your team would be responsible for this?

Use this worksheet and write down a few potential objectives. One is good. Three is better. Eleven is probably too many.


I hate to admit this, but we’re not perfect. D’oh! In fact, we could be downright awful at some things. Those things could be hurting our business significantly. Hurting the quality of our products and services. Hurting our reputation. And hurting revenue, gross margin, and customer satisfaction.

The good news is that we get a fresh start. We’ve got a whole new year to solve these problems. Let’s use it to become as good as we possibly can!

Use this worksheet and write down how we’re going to improve on things we don’t do well.

For me, marketing is my weakness. I love to teach, I love to write, and I love to help business owners. But I don’t do nearly enough effective marketing. So I need to…

Find more effective marketing channels and partners.

If we do NOT achieve this, how much could our business be HURT? Circle one: Lots  Little

How much money / effort will it take to achieve this? Circle one: Lots  Little

How much time will it take to achieve this? Circle one: Weeks  Months

How certain are you that this can be achieved? Circle one: Very  Unsure

Is this consistent with your corporate aspiration? Circle one: Yes  No

Who from your team would be responsible for this?

Use this worksheet. Write down your improvement suggestions.


You’ve made it this far, and you’ve done a great job. Well done!

And, as a reward for your hard work, I’ve got a special holiday gift for you in my next blog post. It’s going to make planning even easier for you…


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Business Planning for Those Who Hate Planning

For Business Owners Only

Hate business planning? Think it takes too much time, is inaccurate, and doesn’t add any value to your life? Join the rest of us… 🙂

The 10/10/10 business plan may be for you. Spend ten minutes a day for three days and you’ll create a wonderful plan. It may be all you need to guide you through the year. Or it may be a good start on something more comprehensive. Either way, time well spent.

We started yesterday by writing two sentences that describe your business’s aspirations. If you haven’t done that yet, do it now.

Today, let’s think about the situation OUTSIDE your company (this worksheet will be useful).

These are things beyond your control. Significant things. Things that could really affect your business in 2017 (or beyond), for better or worse.

What are the opportunities?

What is happening outside your company that, if properly managed, would be really good for it? Think about industry trends. New technologies. Exchange rates. Regulatory changes. A new set of potential customers. A competitor leaving your market.

What’s going on in the world beyond your doors that could really help you?

Now – and this is where you’ll need to write things down – what could/should/must you do to take advantage of these opportunities? Describe things at a high level. For example, perhaps you do commercial building maintenance and you hear about a new elevator refinishing technology. Can you get exclusive rights to it for your city? Write it down.

Get exclusive rights to the Acme elevator refinishing technology for Victoria.

By achieving this, how much will your business improve? Circle one: Lots  Little

How much money / effort will it take to achieve this? Circle one: Lots  Little

How much time will it take to achieve this? Circle one: Weeks  Months

How certain are you that this can be achieved? Circle one: Very  Unsure

Is this consistent with your corporate aspiration? Circle one: Yes  No

Who from your team would be responsible for this?

Use this worksheet and write down a few potential objectives. Ten is probably more than enough.

What are the threats?

What outside forces could negatively affect your business in 2017? Similar to the opportunities above, think about industry trends. New technologies. Exchange rates. Regulatory changes. One or more customers leaving you. A new competitor entering your market.

What could/should/must you do to defend yourself against these threats?

For example, imagine that a government regulation will eliminate 40% of your customers in 6 months.

Significantly increase sales and marketing efforts in non-government areas.

If you do NOT achieve this, how much could your business be HURT? Circle one: Lots  Little

How much money / effort will it take to achieve this? Circle one: Lots  Little

How much time will it take to achieve this? Circle one: Weeks  Months

How certain are you that this can be achieved? Circle one: Very  Unsure

Is this consistent with your corporate aspiration? Circle one: Yes  No

Who from your team would be responsible for this?

Use this worksheet and write down as many as ten potential objectives.

Great job! You’re two-thirds done. See you tomorrow for Step 3.

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Busines Planning Season. Ugh! :-(

For Business Owners Only

Yeah, yeah, I know, I know. I’m supposed to be thinking about 2017. Charting a course. Setting direction. Yada yada.

But business planning sucks.

It takes too much time. It gets too finicky and complicated – especially the numbers. And worst of all, business planning never turns out the way I planned. So why bother?

Yup. I agree with everything you just said. Business planning IS awful. In fact, there’s only one thing worse than planning. And that’s NOT planning.

I think I have a solution. Let’s do a 10/10/10 business plan. 10 minutes today. 10 tomorrow. And 10 the day after that. I guarantee you’ll have a plan.

It may not be perfect. But no plan is.

It won’t be long. But who wants a long plan?

It WILL show your clear priorities, and you WILL be able to use it every day.


‘Kay? Let’s do it!

Take 10 minutes and write 2 sentences about your company’s aspiration (use this worksheet if you like).

Yeah, it’s only two sentences, but take your time and use the whole 10 minutes. It’s important to get the RIGHT two sentences!

Ask yourself the following questions:

  • Where do we want our company to be in 5 or 10 years?
  • Who do we serve, and why do we serve them?
  • What does our customer’s success look like? How can we help them achieve it?

Make your two sentences inspirational. Uplifting. Write them so that your staff and customers can connect to them emotionally. It isn’t about money or numbers, it’s about something greater than ourselves and the day-to-day activities we do.

Imagine you’re with a class of sixth-graders. Their teacher just asked you, “What is your business trying to achieve?” Answer simply and authentically.

A bookkeeper might say, “We love helping small businesses succeed. We take their numbers and turn them into awesome information. We want our clients to unhesitatingly recommend us to other growing businesses.” Yeah. I know. Three sentences. Believe me, it’s fine… 🙂

What about a sheet metal manufacturer? “We want to be Vancouver Island’s most innovative sheet metal manufacturer. If a business problem can be solved with sheet metal, we want to be there.”

A carpenter. “I love making people’s homes warmer and cozier by adding wood finishes and furniture. When Victoria homeowners think of renovating, I want them to think of me.”

Need a hand getting started? Write “We want to become…” and see what shows up on the page.

You’ve got 10 minutes. Print out this worksheet, and I’ll see you tomorrow for Step 2.

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The Biggest (and Most Misleading) Cash Flow Myth

For Business Owners Only

Part 2 of 3…  In part 1, we discussed the first 4 fundamental cash flow elements. We learned that Profit is equal to Revenue minus a variety of expenses.

And because all the expenses have been removed, it’s easy to make an assumption that is actually the biggest, most misleading, and potentially dangerous cash flow myth:

Profit equals cash flow.

As any failed profitable business can tell you, this is just not true.

Profit is simply a measure of operational effectiveness. It tells us how much cash our operating activities SHOULD generate, but it leaves out two critical things that can dramatically affect cash flow: timing and things that don’t affect operations. Which, if ignored, can kill the business.

The rule of thumb? Never confuse “profit” with “cash flow.”

Here’s why.

5. Timing of Receiving Revenue

Let’s get back to revenue. You’ve done some work or delivered some widgets. You’ve created an invoice and sent it to your customer. Your revenue proudly shows the total of all your invoices. Good work!

And then your customers don’t pay for one month. Or two months. Or, gulp, three months.

Can you see how the timing of customer payments significantly affects cash flow?

Your accounting system tracks how much money your customers owe you in Accounts Receivable. Which is great, but wouldn’t it be nice to know when you’re going to get paid? This is where “Accounts Receivable Days” comes in: it’s the average number of days it takes your customers to pay.

Rule of thumb: Reduce Accounts Receivable Days to improve cash flow. In other words, get paid sooner.

6. Timing of Paying Expenses

Just as your customers pay you, you pay your suppliers. And just as your customers sometimes delay paying you (which worsens your cash flow), you can delay paying your suppliers (which improves your cash flow by keeping the cash in your bank account).

Your accounting system tracks how much money your business owes in Accounts Payable. And the average time you take to pay your bills is known as “Accounts Payable Days.”

Rule of thumb: Improve cash flow by increasing Accounts Payable Days. But don’t wait too long to pay your suppliers or they may not want to have you as a customer.

7. Things That Don’t Affect Operations But Do Affect Cash Flow

Many other things affect cash flow, but keep two in mind for now:

  • loan payments, and
  • equipment purchases.

Neither of them show on your Income Statement. This makes them easier to forget when you’re thinking about cash flow. But when you forget about your $800 truck payment and the $3,500 you just spent on a new laptop, you can find yourself in a cash flow pickle at the end of the month.

Rule of thumb: Loan payments and large equipment purchases don’t show on your Income Statement but they DO affect cash flow!

Closely and Constantly

Cash is the life blood of every business. It must be monitored closely and constantly. Spend a few minutes with these 7 elements each week and you’ll develop an excellent sense of your business’s cash flow.

Tomorrow: Learn Three Common Cash Flow Mistakes (So You Can Avoid Them)

Free online Cash Flow training! Register for my November 10 session here.

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7 Basic Cash Flow Elements – Part I

For Business Owners Only

Once a year I teach an entrepreneurship course at the University of Victoria. Single biggest comment from the students? “You say the word ‘cash’ too much.

Yes I do. Because 82% of businesses that fail, fail because of cash flow problems. So I’m going to keep saying it until that number drops significantly!

Here’s the first of a three part article on 7 basic cash flow elements.

The 7 Basic Elements of Cash Flow

The 7 basic elements of cash flow introduce key terms that the business owner will use throughout her career. They inform her about her cash flow and allow her to make appropriate, timely decisions. And the 7 elements naturally lead to more sophisticated financial literacy topics when the time is right.

1. Revenue or Sales

Revenue is the source of sustainable cash flow. If you create invoices for your customers, then revenue is the total of those invoices.

If you’re in a cash business, then revenue is the total cash that you receive from your customers.

Rule of thumb: Increasing revenue should increase cash flow.

2. Sales and Marketing Expenses

Sales and marketing activities create revenue. They bring appropriate customers to us and convince them to purchase.

There’s always tension in the minds of business owners about these expenses: we must spend money to find new customers and convince them to buy. But spending money reduces cash flow. So we’re always balancing the money we spend on sales and marketing with the revenue that they generate.

To reduce the tension, it’s very important to track the effectiveness of sales and marketing activities: they MUST generate significantly more revenue than they cost. How to do this is a topic for another day, but the rule of thumb is this:

Healthy cash flow needs sales and marketing activities to generate significantly more revenue than they cost.

3. Cost of Goods Sold (COGS)

When a customer buys a product from us, we incur costs related to acquiring, producing, packaging and shipping that product.

This is also true when we deliver a service to a customer: we have labor or technology costs to deliver the service.

The rule of thumb is simple: The smaller our costs of goods sold, the better our cash flow.

4. Other Expenses

In addition to sales, marketing and COGS, there are many other potential expenses that reduce cash flow: staff, rent, communications, travel, accountants and lawyers, etc.

The rule of thumb: Spend as little as you can without affecting your ability to operate effectively.

Interregnum: Profit

Everything in these 4 sections appears on the Income Statement (or Statement of Profit & Loss). Revenue is shown at the top and everything else is subtracted from it to create the “bottom line”. When our revenue is greater than all the expenses, the bottom line is a positive number called profit. When revenue is less than expenses, the bottom line is negative and is called a loss. Which leads us to The Biggest and Most Misleading Cash flow Myth

…which we’ll discuss in Part 2.

BTW, want to get some great, free online training on cash flow? Learn more about my session on November 10 here.


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Good News About Business Ownership. No, Really!

For Business Owners Only

I’m researching business ownership success rates for a presentation next week. It turns out that – wait for it – the numbers are way better than they’ve ever been.

Scott Shane writes in Entrepreneur, “The rate at which American employers go under has fallen by 30 percent since 1977.”

Mr. Shane’s article then discusses five reasons why he thinks this is so:

  1. Business founders are assessing their potential startups more rigorously.
    Absolutely! We now clearly understand that startups and small businesses aren’t just smaller versions of large companies. They’re a different breed entirely. The lean approach, business model canvas, and startup events have spread this thinking everywhere.
  2. New companies are being started in sectors that have a higher chance of success. This is a predictable result of analyzing and assessing, isn’t it?
  3. Business owners are better educated than ever before. Not only do we have better models than ever before, it’s easier than ever to find good lessons and advice.
  4. The technology available to business owners is better, and it’s getting used more. I can attest to this from launching a new product last month. Creating websites, landing pages, processing orders, and setting up merchant accounts can all be done in a few hours.

These points go directly to something I’ve always preached: business ownership is a distinct vocation. And like any profession, it requires knowledge, training and practice.

Mr. Shane’s fifth point is that less companies are being started. Which means that competition to established businesses from new entrants is reduced.

This declining startup rate is often presented as bad news. But it’s predictable: business owners that are better educated and doing more up-front assessment will naturally start fewer businesses and – as we’ve just seen – fail less often.

But when they do decide to start, their success rate is higher and I bet their businesses grow faster, too.

This awareness, that “smarter = more successful”, showed up clearly in a survey of over 1,100 business owners I did last year. They identified three things they needed to be successful: better thinking, better planning, and better advice.

But – and I found this very interesting – 74.1% said that they didn’t get enough support from their professional advisors.

Hmm… seems like business owners are leading the way. Time for us business advisors to pull up our socks and catch up!

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