Preparing a Personal Balance Sheet

Taking control of your financial future is a process. And, as with any process, it is important to monitor your progress. One of the best ways for you to measure financial progress is to periodically prepare a personal balance sheet to determine your net worth.

Calculating your personal net worth is also the best way to know exactly what your starting point is as you begin to develop a financial plan and set goals for yourself. A balance sheet calculates your net worth by comparing your financial assets (what you own) with your financial liabilities (what you owe). The difference between the two is your personal net worth. Don’t be discouraged if your net worth is negative, keep in mind that this should be an accurate depiction of your financial situation. Setting goals is much easier once you know what your current net worth is.

Before you get started, pull together all of the information that you have available. You’ll need your latest bank statements, as well as the principal balance of any loans you have. Once you have all of that information available, start developing your balance sheet by listing all of your assets (financial and tangible assets) with the values.

• Cash (in the bank, money market accounts, or CDs)
• All investments (mutual funds, college savings accounts, individual securities)
• Home value (the resale value of your home)
• Automobile value (the resale value of your car)
• Personal Property Value (resale value of jewelry, household items, etc)
• Other assets

The sum of all of those values is the total value of your assets. Your goal should be to continually increase your assets.

Next, you can look at your liabilities, which should be everything you owe. Here are some common liability categories:

• Remaining mortgage balance
• Car loans
• Student loans
• Any other personal loans
• Credit card balances

The sum of all of the money you owe is your liabilities. As you start to pay down your debt, your total liabilities will decrease. The difference between your assets and your liabilities is your net worth. You can start to increase your net worth by decreasing your liabilities, increasing your assets, or by doing both! For many people developing a debt reduction plan is the best place to begin taking control of their personal finances and growing their net worth. Remember, a dollar saved is a dollar earned, and reducing debt and interest payments can eventually lead to financial freedom. Make sure you continuously update your personal balance sheet (I recommend quarterly) to ensure that you are tracking the progress toward reaching your financial goals. 

3 Components to Small Business Success

I was recently asked what one thing separates the entrepreneurs who succeed from those who ultimately fail. I thought for a moment and answered with a single word - adaptability. Since that conversation, I've given considerable thought to the question.

I've actually identified three major components to small business success. The first is passion.  If you have a strong enough belief in a product, service or business concept that you are willing to step out from the crowd and publicly stake your claim and begin chasing down your dream, you've got passion.  Passion is energy! It's attitude and belief.  Passion is fuel for the entrepreneurial spirit. If you lose your passion, your out of gas.

The second component is Vision.  You have to be able to look into the future and know where you want to take your company and what it will look and feel like once you get there.  Visualizing a future checkpoint is only half of the equation though.  The big miss for many would-be entrepreneurs is also to have a vision of the hard work, the challenges and the climb to the summit.  If the passion remains strong, then the vision becomes clearer, and the day-to-day climb becomes enjoyable.

The third and final component is determination.  As a small business owner, your commitment to your passion and your vision will be tested regularly.  Randy Pausch, in his last lecture titled Achieving Your Childhood Dreams said this, "The brick walls are not there to keep us out. The brick walls are there to give us a chance to show how badly we want something.  The brick walls are there to stop the people who don't want it badly enough."

Being determined enough to run into the wall harder and harder isn't always the answer.  Sometimes you need to figure out how to get over or around the wall, and that brings us back to adaptability.  Determination and adaptability work together a lot like a teeter-totter.  It's the ups and downs that make it a game and keep it interesting.  

In summary, it's passion that fuels the engine, vision that provides navigation and steering along the way, and your determination to stay on the road until you reach your destination that makes you successful in business.

Using Your Business Plan as a Management Tool

Most small business owners don't understand the value and importance of developing and maintaining a written strategic business plan (SBP). They see taking valuable time out of their business day to develop a written plan as an unncessary task that they don't have time for and don't really need.

I've had many small business owners tell me that business plans are for large companies or for businesses who are approaching a bank to borrow money.  My response to that line of thinking is this:  All companies, regardless of size, should have a written plan.  For small companies particularly, having and using an SBP as a management tool can ultimately make the difference between success and failure.  An effective business plan can save you time and money by helping you prioritize and focus your business activities.  An SBP can give you control over your personnel management, marketing activities, finances and day-to-day operations.

Packaging your business in document form and telling the story of your company in print almost forces you to view your business objectively.  Your plan should clearly present your current position, your vision for the future, including specific measurable goals, and your detailed action plans for realizing those goals and your vision.

As a business consultant, one of the benefits I bring to my clients is that I ask a lot of questions.  By asking questions like why do you ...?, how do you...?, or why not...?, it forces them to not only explain the reasoning behind their process, it challenges them to consider other alternatives.  As a small business CEO, you should constantly be looking at your strategic business plan and asking questions of yourself, and your entire team, as though an outside consultant were asking those questions.

Your written SBP provides a valuable management tool that you can use to clarify and improve every moving part of your company.  It also forces you to measure actual results against written objectives, which, believe it or not, is all too often a key missing link for measuring the financial health of most small businesses.

My challenge to you is to make the commitment to develop or update your SBP over the next ninety days.  I am confident that you will find that the value of getting your entire business operation broken down on paper is well worth the time and energy it takes to do it.  If you decide to tackle the planning process yourself, a good resource is a book by Rhonda Abrams, titled Business Plan in a Day.  This book provides a good frame-work for most small businesses to start from.  Don't be fooled by the title though, you can expect to spend far more than 8 hours developing your plan.

Business Disaster & Continuity Planning

Devastating events like the September 11, 2001 terrorist attacks in New York and Washington D.C. have caused businesses around the world to take a closer look at their business continuity plans.

According to Price Waterhouse Cooper's research:

• An estimated 14,600 businesses inside of and around the World Trade Center were impacted by the disaster.
• The indirect impact to U.S. businesses in the 12-month period of time following the 9/11 attacks was estimated to be $151 billion.

Whether caused by terrorist activity, natural disaster, technical problems or human error, any emergency can force catastrophic consequences and enormous costs onto your business.  The results:  property damage, interruption of operations, lost profits and loss of customers.

In the event of a business emergency, it is critical that you make the right decisions under pressure and bring the immediate threat to your company and your employees under control quickly.  Your company must resume its most important functions in at least an "emergency mode" as quickly as possible.  At the time of a disaster, the one thing that all companies have working against them is time.  Lost time translates into dissatisfied customers, lost revenue and more.


Traditionally, disaster recovery and continuity planning has been driven by the computer and information technology (IT) industry.  Because of the heavy emphasis on computer systems and other technology, larger companies with designated IT personnel on staff are much more likely to have a disaster and continuity plan in place than smaller companies that operate without professional IT personnel.

Small Business (According to the SBA)

• In 2006 there were 26.8 million businesses in the U.S.
• 99% have 500 or fewer employees
• 98% have 100 or fewer employees
• 88% have 20 or fewer employees

That means that out of the 26.8 million total businesses in the U.S. 23,583,000 have 20 or fewer employees.  It's the smaller companies that are most likely to not have a continuity plan in place.

A Business Continuity Plan (BCP) can reduce the effects of a disaster, or in some cases even prevent it from having any visible impact on business operations to your customers.

According to the Disaster Recovery Institute International (www.drii.org), 93% of companies that experience a disaster without a recovery plan close their doors within five years of the event.

50% of the companies that lose critical business functions for more than 10 days never recover.

There are many types of disasters that can affect your company's bottom line.  They include:

• Windstorm, hail, tornado
• Lightning strike, power surge
• Extended power outage
• Equipment failure (refrigeration)
• Roof collapse (weight of snow, ice or sleet)
• Water damage from leaking fire extinguishing system
• Water damage from broken water/steam pipes
• Fire at your business or a neighboring business
• Smoke damage
• Explosion (gas leak, etc.)
• Air craft or vehicle
• Vandalism, riot
• Break-in, theft
• Data breach
• Flood
• Earthquake
• Volcanic action (airborne ash, dust)
• Loss of key employees, suppliers or customers
• And more...

So why do most small businesses neglect to prepare a business continuity plan?  The most common reasons are:

• Lack of time and resources
• Lack of top management support
• Too many causes of disaster to plan for effectively
• Little awareness of potential hazards
• Lack of knowledge in developing a plan

With the future of your business on the line, are you really willing to risk the consequences of not being prepared?

If the obvious reasons for planning, like avoiding financial ruin, maintaining your customer base and market share, as well as minimizing negative publicity, are not enough to get you to take action, consider this:  Protecting the confidentiality and integrity of customer, patient and employee personal information is no longer just a best practice for businesses, it is now a legal requirement.

Basis Considerations

As you begin to prepare your business disaster and continuity plan, keep in mind that the goal is to ensure that you have the following basic elements in place if a disaster strikes:

1. An alternate business location (if needed);
2. Access to vital records and resources during the recovery period;
3. Key people assigned to the recovery effort; 
4. Adequate business insurance (review coverage with your agent annually); and
5. A plan for a speedy recovery.

Planning Steps

1. Write out the objectives of your plan
2. Choose your plan coordinator and develop your team
3. Assign action items, coordinate responsibilities and time frames
4. Complete a risk assessment
5. Complete a business impact analysis
6. Select your recovery team
7. Develop your recovery strategy and action plans
8. Put your plan in writing
9. Distribute your written plan to key team members
10. Test your plan regularly

We should all know our motivational DNA type

In her New York Times bestselling book "Get Motivated," Tamara Lowe provides an eye-opening body of research on the subject of motivation.  In this book she unveils a new system that shows us how to better manage ourselves and work cooperatively with everyone, from our children to our employees and our co-workers.

The Four Laws Of Motivation

1. Everyone is motivated, but each of us is motivated differently. 
2. Each individual is created from conception with a unique and distinct motivational type.
3. The very things that inspire and excite one motivational type may cause another to disengage.  What motivates one type can de-motivate another.
4. No one motivational type is "better" than any other.

What motivates you?

Tamara has provided a free on-line DNA profile tool that anyone can use to determine their own motivational DNA type.  To get your on-line DNA profile go to:  http://www.getmotivatedbook.com.  At the bottom right corner of the page click on "check out the free gifts."  Once the next page comes up, click on "take the test" (at the top of the page).

Everyone should take advantage of this opportunity!  In my opinion, the book is a must-read tool that will help you in your personal and professional life.