Want all options on the table so you accumulate wealth from your business? Then you will want to set your desired end result today (1. Direction), long before you want to exit; Setup scalable (2. Organization Structure) systems and structures now, to enable your business to grow; Teach your people how to function as a high performing team (3. Team Cohesion) and then you’ll be able to select the best way to get a return on your investment from your business (4. Results).
It’s time to start looking at your business through the eyes of an investor… you are the primary investor in your business, correct?
As an investor, when you buy stocks, you have a specific purpose in mind for doing so: you want to capture the appreciation of that stock, so you have more wealth. However, you don’t reap that appreciation until you sell that stock. To achieve that appreciation, you have to set a price goal and then commit to selling it at that price. Then when the stock price pulls back, and you still like the rationale for owning that stock, you buy again, set your price goal, sell it at that price. This is how you accumulate wealth with stocks.
The same is true for real estate. We all know that stocks and real estate go up and down in value when we are busy doing other things. If your top priority goal is to accumulate wealth from real estate, then you buy income producing real estate so you receive monthly income. One day you will sell it and enjoy the return from capturing the price appreciation... if there was any.
As they say, timing is everything in both types of transactions.
What about a business. Is that an asset you could sell whenever it hits the price you want? Not exactly.
Not like you think.
Not like you’ve been told… and probably not as you had hoped.
If you want your business to become an asset to help you accumulate wealth, you have to change your priorities about how you run it so that it gives you as many options for appreciation as possible. If you don’t re-order your priorities today, you are stuck with few options later.
When you own a business, you have two ways to capture appreciation:
- Save your salary and dividends and/or.
- Sell at the optimum time when the business is worth what you want to sell it for.
If you want to sell your business, you must run it so that it is transferable and saleable at all times, regardless of when you want to exit or what age you are.
This is the moment you must stop thinking like an employee hitting retirement age, and start thinking like an investor looking for the optimum time to sell.
A transferable business is one where knowledge, relationships, X-Factors and entrepreneurial know-how have been embedded in the company in the management team, systems, automations and individuals.
The company can be taken over by the next owner and achieve the same or better results without you, the current owner, in the business. This is essential regardless of whether you want to sell it to employees, family members or an external buyer.
What happens if you don’t make your business saleable and transferable? It’s not an asset that is easily sold. Who would buy a business they can’t manage themselves?
If you can’t find a buyer for your business, you have a few options:
- Close it one day.
- Keep running it yourself.
- Hire a general manager who runs it for you.
- Acquire another business that make your business more attractive to your ideal buyer.
If you or the business is suddenly incapacitated with the loss of a key employee, health concerns, lack of energy to drive growth or you die without having made the business transferable and saleable, there is little value, other than perhaps the assets to sell.
Why? A vital role necessary to the health and functioning of the business is now unfilled.
You can’t sell something you haven’t been investing in for the last few years, either. If revenue is flat, profits inconsistent and there have been no new customers or innovation in the last few years, most buyers will walk away. They want to acquire growth in most of those areas to satisfy their investment goals.
Remember, you are the primary investor in your business. What kind of return do you want? You need to settle that question long before you get to your finish line and steer the company to that outcome starting now.
To learn more about how to make your business transferable and saleable, go to these links:
