2 best bits of surety advice for how to write a business plan

By Erle Benton, AVP, Surety Contract Underwriting, UFG Surety

Business planning is essential. Whether your construction company's opening day is around the corner or your next stretch of road leads to retirement, a business plan is a map that can help you get where you want to go.

The benefits of a well-rounded business plan can be plentiful, including:

• Creation of a path to achieve milestones.
• Support for determining financial needs, revenue models, spending decisions and cash flow challenges.
• Fostering business growth.
• Minimizing risk.
• Positioning your company's brand and marketing strategy.
• Progress tracking and success measurement.

How do you start writing a business plan? It might feel a little overwhelming at first, so try to approach your plan in attainable steps.

As a surety partner, here are my two best bits of advice for how to write a business plan.

1. Add your bond agent and surety carrier to your list of business advisors.

Relationships matter. Take some time to reflect on the relationships you have with your CPA, attorney and banker. These professionals can offer you solid, timely, confidential and practical information that could be key to your company's growth.

Now ask yourself about the relationship you have with your bond agent and surety carrier. While its obvious how legal counsel and financial partners might fit into your planning efforts, it's easy to overlook how your surety bond partners might help you flesh out an even more well-rounded business plan. Your surety bond agent and surety carrier can often do more than simply connect you to the bonds your company needs.
If you've never considered tapping into the expertise of your sureties as business advisors, here are some ideas about information they may be able to offer:

• Analysis of your financial information.
• Comparison of your financial data to peers.
• Input on operational changes.
• Suggestions for how you can be more profitable.
• What your balance sheet should look like to maximize surety capacity and enhance your relationship with your banker.

Related reading: 7 surety bonding habits of successful contractors

2. Plan for tomorrow today.

This is a big one: business continuity planning. Business continuity may have several parts, including succession planning or emergency planning, and having your thoughts in order can be an asset if you want to sell your construction company, transfer owners or liquidate.

It might be challenging to think about the future, especially if retirement feels light years away, but the sooner you begin thinking about business continuity and your ultimate goals the better. Be prepared for this part of your business plan to take a lot of time to develop, discuss, formalize and complete.

Some questions you can ask yourself to start your business continuity plans are:

• What do I hope to accomplish?
• What's the best way to exit the company with the largest financial gain?
• Will my retirement be entirely funded by the sale of the company?
• Are there key people inside the company I should include in the transaction?
• Will family continue to operate the business? (This may be difficult, but don't shy away from the conversations.)
• Am I willing to carry some or all the purchaser's notes payable? If so, what's the anticipated maturity date of the notes? Can the company's cash flow meet that schedule?

One tangible step you might take while you're writing the big picture part of your business plan is to tap into the expertise of your insurance company's risk control consultants. They can partner with you to assess your company's risk management strategies, helping you strengthen daily operations and do what you can to avoid costly claims that could bring operations to a halt before you're ready. What you learn from your risk control partner will likely play a critical part in your business continuity plan when it comes to disaster response.

If retirement or selling your construction business is close at hand, it may be appropriate to ask key employees to sign a work completion agreement. This can help ensure open projects are completed and these individuals receive their normal salary as well as a bonus once the company has fulfilled its obligations. This may be also important if your spouse signed bank loan documents and the surety's general indemnity agreement along with you. Of course, your lawyer can help you decide what's best for your situation.

When it comes to plans for transferring ownership, remember to ask advice from your surety partner who has a vested interest in the future of your company. Some ownership transfer options you might discuss include:

• Finishing open work and the orderly closure of the company once you've completed business commitments.
• Arranging for a group of key employees to purchase the company.
• Developing an employee stock ownership plan (ESOP) offering employees a portion of ownership based on tenure.
• Selling to an outside entity or competitor.
• Selling to a private equity.

When planning for business continuity as your company moves to new owners, be sure to address:

• Transfer of ownership with minimal tax consequences.
• The sale structure.
• Options on how to reward key people when the company sells.
• An income stream after the sale outside of what the purchaser owes you.

Your own research is crucial

Of course, there are advantages and disadvantages to each of the ideas I've shared with you here. And it's important that you think about all sides before making decisions to seal any deal. Welcome the chances that come your way, like seminars, to learn about writing all the different elements of a business plan. If your research points to it being time to explore a new surety partnership, I hope you'll consider UFG Surety. Talk to a UFG agent about us today.

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