Many business owners dream about ‘what might be possible’ when they start out. And they dream big. As a business owner myself, I’m not immune to this too. Even the most successful business owners don’t reflect on their life and say they wish they’d spent more time on their business. They’re more frequently creating a business to support their children, create a legacy, give back to their community and ultimately get more flexibility to control their life.
Consider these three ways to have a successful business:
- Prepare to sell at all times
- Focus on the intangibles
- Focus on the value, not income
Creating a successful business is not just about focusing on the company’s day-to-day management. It’s much more. Let me save you some time and give you the recipe that will maximize the value of your business so you can live your life on purpose.
1.Prepare to sell your business even if you’re starting.
More than 70% of businesses that are put on the market do not sell. Imagine putting your blood, sweat, and tears into your business only to sell assets, liquidate, or file bankruptcy and lose all you have built. That’s a hard pill to swallow.
For most business owners, 80% of their net worth is tied to their business. So how does it make you feel to know that you have a monthly income but may end up walking away from your business?
Even if you’re a “young” business owner in your 20s, 40s, or 60s, planning for your exit does not mean actually exiting your business any time soon.
Exit planning is just a good business strategy.
Did you know that there is a 50% probability that you will be impacted by one of these five Ds?
It would be wonderful always to prepare and choose the exact time when you might transition away from running your business, but sometimes the unpredictable hits, and you have no choice but to accept whatever is thrown your way. Even if that means losing some or all of the wealth you have created in your business. So always be prepared to sell your business.
2. Focus on the value, not income
It’s not about creating value and generating income but making your business a valuable asset.
That starts with knowing your starting point and helping your business baby as a grown-up.
Successful business owners know what their company is worth and have a target for what they want their company to be worth.
Identify the value of your business and where it benchmarks in the range of value in your industry. Once you know this baseline, you can focus on protecting it, building more value, and eventually harvesting and reaping the rewards.
3. Focus on the intangibles
Some of the largest companies in the US today have mind-boggling valuations; Apple has a market cap of $2.3 trillion and Microsoft $1.9 trillion. Yes, that’s a trillion. What these companies have in common is knowledge capital. Their valuation is based on their ability to create, transfer, protect and exploit their knowledge assets. Their intangible assets account for more than their tangible assets.
Yet, many business owners think that the amount of money their business makes is its value. Frequently, it’s because they’re focused on the numbers that accounting software spits out, which doesn’t consider the growth in intellectual capital.
In his book Walking to Destiny, Chris Snider provides four areas for business owners to work on:
- Human Capital – Does my business have talented and dependable managers and employees? Or does my business depend on me to be successful?
- Customer Capital – Does my business depend on one client? How strong are my relationships with my customers? Are they transferable?
- Structural Capital – Does my business have clear processes and systems that are well documented and transferable?
- Social Capital – Does my business have a strong, reputable culture and brand locally or nationally?
Successfully transitioning your business requires years of planning before the day arrives, whether it’s by choice or circumstance. If you have the mindset to identify, protect and build value by focusing on these three areas, you will intentionally set yourself up for success.
“Luck is what happens when preparation meets opportunity.” – Roman Philosopher Seneca
Adviso Wealth is dedicated to working with people just like you. We want to give you the clarity and confidence you need to achieve your personal and financial goals.
To learn more, visit advisowealth.com or email firstname.lastname@example.org