Growing a business value to a point at which you can achieve your goals can take years. It’s rarely as easy a flipping a switch or making a small change.
Unfortunately, many business owners severely underestimate how much time it takes. This commonly leads to burnout, especially when owners view the challenge of spurring growth as insurmountable.
Knowing what the business is worth now can prevent you from burning out or staying in the business for longer than you want. It helps you determine how long it may take to grow your business to where you need it to be.
Unless business ownership is merely a pet project, the value of your business will likely affect you, the goals you want to pursue and the lifestyle you want to live after you retire.
As mentioned when we discussed exit planning, there’s a crucial question many business owners need to ask themselves: Are you a lifestyle business owner or a value accelerator?
Failure to understand the distinction could lead to reduced circumstances in retirement, or even to the possibility the owner can never exit the business.
Value Builder System
If you’d like to look at strategies to make your business as valuable as you need it to be, we can help you with our Value Builder System.
If your chief financial asset is your business, you need to know that the value of that asset will be sufficient to provide for you and your family after you have exited the business. Value accelerators help make their businesses run better.
To build a business as an asset, you have to become a value accelerator. You need to look beyond whether the business’ profits are sufficient to maintain your lifestyle. Instead, you’ll need to look at your business as an entity outside yourself.
You need to look beyond revenue and profit to measures such as:
- the market in which your business operates,
- human capital and the management team,
- patents and processes,
- the loyalty and diversity of customers, and
- the strength of the company’s brand separate from the owner.
Think about your business as an engine. The profitability is the output of the engine. First, if you eventually want to sell that engine to somebody else, you need to make sure that someone else can run it.
Second, your business must operate independently without you. The buyer wants to make sure that they’re buying an engine that’s going to generate future revenue and profit.