Are you Creating Value?

Let’s start with a simple truth... “Most business owners are not increasing their market value!”

In fact most business owners have created a lifestyle business that generates enough cash flow and ancillary benefits to support their families. In simple terms lifestyle businesses have limited scalability and potential for growth as any increase in activity would destroy the very lifestyle the owner has set up.

So what’s the prognosis then for lifestyle companies when the owner is looking to find a successor or sell the company?

“These are firms that depend heavily on founder skills, personality, energy, and contacts. Often their founders create them to exercise personal talent or skills, achieve a flexible schedule, work with other family members, remain in a desired geographic area, or simply to express themselves. But without the founder’s deep personal involvement, such businesses are likely to, well, founder. Professional investors are therefore rarely involved with lifestyle businesses.”[1]

Yes, lifestyle businesses can work if the owner is saving the money and investing in other assets – real estate, stocks, bonds, etc. But in many instances the money has not been saved and the primary asset in the owner’s portfolio is the ownership in an unmarketable company.
Lifestyle-Bus-RuleIt’s time to rethink your business and think about value creation. How do we create value? – We think in terms of how to drive value!

Below is a chart from Private Capital Markets that shows value drivers and strategies to reach the goal of increasing value:

Actions-that-affect-bus-value

[1]   Soul Shelter » Entrepreneurship: A Primer  http://www.soulshelter.com/2008/05/21/entrepreneurship-a-primer/

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Categories: Maximize Value

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