Where to Find Help
Business Concern
As the owner of a small to medium size business, you may have felt the need to ask for help but not felt comfortable doing so. Owners of businesses are often skilled in the business they own and enjoy the respect of their family and friends. If their businesses are successful (profitable), it is usually based on their leadership and good fortune. But things change and sometimes the successful are faced with difficulties and even poor results. The humility it takes for an owner to recognize that business is a team effort and that the policy-making group of a business needs help is a principal...
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Creation of Wealth for Business Owners
Business Concern
Among the common goals of members of a capitalistic economy is the creation of wealth. This is often a reason why people own businesses. For an individual, the concept of wealth creation is the escape from dependence on earning funds for current expenses to live a certain lifestyle to building up assets and resources that appreciate over time and are of a magnitude to sustain that lifestyle or a better lifestyle without the need to earn funds for current expenses. Creation of wealth is a reference to accomplishing financial independence through the creation of passive income from investments....
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When Planning Becomes Dynamic
Business Concern
Traditional planning is static. If there is a written plan, we see the plan formulated, documented in writing, presented at a meeting, and then put on the shelf to be consulted for next year’s retreat. This is the opposite of a forceful and changing dynamic plan. A dynamic plan can accomplish continuous improvement in business performance over time resulting in increased profitability. How does a static plan become dynamic? The answer is in the format of the plan. To be forceful a plan must be understood and implemented at all levels of the business – operational as well as management. The...
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The Concept of Time – How Its Progression Affects Important Tasks
Business Concern
The Concept of Time – How Its Progression Affects Important Tasks Time is the progression of events from the past to the present into the future. Time marches forward relentlessly. From birth to death, we age, and every moment that passes is unique and unrepeatable. The more important tasks we accomplish within our lifespan, the more fulfilling and impactful our lives can be. But what defines "important"? Is it happiness? Recognition? Pursuing a passion? How we define, or not define, “important” has a great deal to do with how we spend the time of our life span. I believe in defining...
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Pay Attention to What is Important
Business Concern
In the new year make sure you pay attention to what is important but not urgent. This is the time to make resolutions – that process involving review of the past year and resolving to do something different in the new year. It is a given that urgent but not important matters often replace important but not urgent matters in the time allocation of business owners. This diverts the owners from accomplishing important long-term tasks such as obtaining maximum value for their business interests. To pay attention to what is important you must prioritize paying attention to what is important by...
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Important Accomplishments
Business Concern
As a business owner imagine how it would feel at the end of the year to look back and realize you have reached one or more important accomplishments. You used your values to create a strategy. You set a goal at the beginning of the year. You created a plan to act to accomplish the goal. You executed the plan by acting to reach the goal. The feeling would be one of satisfaction and a sense of accomplishment. For most owners this feeling of satisfaction will not be possible. Most will not have articulated their values and created the strategy to set the goal. Some will not have published the...
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Establish a Profitable Business – Do Not Stop There!
Business Concern
No one said it would be easy. If you are the owner of an interest in a business which has become profitable, you and your team have done something right and it probably was not easy. Moreover, it will not be easy to keep your business profitable. What follows is a chart for the failure rate year by year from a LendingTree analysis of U.S. Bureau of Labor Statistics data (). Time Frame Percentage of Failure Within 1 year 23.2% After 2 years 32.8% After 3 years 36.2% After 4 years 43.2% After 5 years 48.0% After 6 years 52.9% After 7...
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Shoulda, Coulda, Woulda
Business Concern
The idiomatic phrase – shoulda, coulda, woulda – conveys the feeling you as the owner of a business might have in three years. Ok, “Could've, Would've, Should've” is a Taylor Swift (and Aaron Dessner) song. But it derives from the phrase often written as “shoulda, coulda, woulda.” The combination of the meaning of each – should conveying correctness, could conveying possibility, and would conveying a thwarted intention – yields a meaning of the uselessness of looking back or looking for excuses. Pat Riley, President and former coach of the Miami Heat and the Los Angeles Lakers...
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“No One Wants to Buy a Job”
Business Concern
The quote is from Mordecai Evans who is the Lead Advisor for Business Acquisition Advisors, LLC located in Augusta, Georgia. Mordecai went to work for a pharmaceutical company after graduating from Clemson. His passion for entrepreneurship and sales led him to becoming a broker with a business brokerage firm. Recently, Mordecai formed his own merger and acquisition firm, Business Acquisition Advisors. Rick asked Mordecai to do a Zoom interview about his experiences with the small to medium size business market. What follows is a summary of that conversation. Rick began by asking about what the...
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Thinking About Who Will Buy My Business
Business Concern
If you are thinking about who is going to buy your business, you have already dealt with the significant core perception necessary for business strategic planning: that inevitably, voluntarily or involuntarily, with good results or bad, you will transfer your business interest. The reality check for the owner-manager of a business is the perception of and planning for the inevitable transfer of the business interest. Coming to this realization is the basis for the Prior Diligence strategy. The owner and the business will separate, the principal unknown factor is when and what happens to...
info_outlineBusiness risk is the risk that the business will falter and the entire investment of time and money the owner placed in the business will be lost. For most business owners the motivation for starting a business is that at some point there will be a wealth building event from business ownership. But it is a flip of the coin – half of businesses started will fail. If you own an interest in the typical small to medium sized business, there is a greater than fifty percent chance the business will fail in the first five years.1 The four most common reasons for failure: (1) poor marketing (forecasting and adequate budget), (2) inadequate management (founders understand production or services but fail to appropriately oversee employees), (3) financing (lack of working capital), and (4) lack of effective business planning.2 From my years of experience as a business consultant, I can tell you that if you engage in effective business planning, your business will not fail. If you are effectively planning, you will not make the mistakes involved in the first three reasons for business failure. Effective business planning, like most worthwhile endeavors, is not easy but for those who learn how it can be what makes wealth building possible.
The wealth building event occurs where the investment of time and money in the business is converted into cash in the owner’s personal account subject to investment risk not business risk. Compare business risk to personal investment risk. Business risk is inherent to the operation of a business – it is the uncertainty about whether a company will be successful and generate a profit. Where the business does not perform well, money and time spent on the business will be lost. For most small to medium sized businesses, the risk cannot be diversified over different markets and products. Investment risk is the risk that an investment will lose value. This can happen for a number of reasons, including factors like overall market fluctuations or inflation. However, a investment portfolio can be diversified and be managed to avoid loss of capital. While there is still a risk of loss with investment risk, as compared to business risk, the risk is greatly reduced. If money derived from the business is converted from business risk to personal investment risk, the possibility of financial independence over time becomes more likely.
The secret of planning is that you have to start at the end and work to the beginning. If you want a wealth building event in five years, envision what that looks like. For a business owner, it will most likely be a sale of the business interest for maximum value, removing the value built up in the business at business risk to cash in your personal account at investment risk. That basic strategy can be the beginning of the effective business planning that will make such a wealth building event possible. I call that strategy Prior Diligence, and I describe how to create and execute that strategy and business plan in detail at my Substack site Owning a Business (https://rickriebesell.substack.com/).
Prior Diligence is a strategy that is the basis for planning to accomplish the result of realizing the highest possible value from ownership of a business interest. The components of Prior Diligence are: separation of the owner from management, the presence of co-owners, the implementation of a buy-sell agreement among the owners, a sale to an unrelated outside buyer, and management of the business with dynamic planning. All of these components are described with more detail in the archives of Owning a Business.
You can begin the planning process at any time, no matter where you are with your business. The important thing is that if you are not planning now, you need to start. The sooner you start, the sooner you will experience the wealth building event.
1 https://www.jpmorganchase.com/institute/research/small-business/small-business-dashboard/longevity