By Eric Reich
Every business owner just read that and said to themselves, “Yeah, right!”
As business owners, business always comes first. It comes before our own needs and, unfortunately, even before our family’s needs at times. It is something business owners think about every waking moment, including nights, weekends, vacations and holidays. Non-business owners find it hard to understand the toll that running a company can exact on the life of an owner, from failed relationships and broken families to a loss of friends. With a business requiring that much attention, it’s hard to imagine being able to put your needs and your family’s needs before your business’s.
However, that is exactly what you need to do. Focusing more on your own needs and your family’s needs can actually help your business be more valuable.
A significant part of the value of any business is its ability to be independent of the owner. When your business’s success or failure is completely dependent on you, then the valuation of that business is dramatically diminished due to a lack of continuity and transferability. In many cases, the business itself may be considered worthless. That’s hard to imagine for a business that has strong revenue and makes a good living for you, but unless you can transfer that to someone else, it may be essentially worthless.
How do you go about spending less time in the business and increasing the value at the same time? For starters, you need to develop others in the business to take on leadership roles. Having a next-gen leader allows you to spend more time working on the business instead of working in the business. Ideally, you would have several people, preferably younger by 10-plus years, that you could train to run different parts of the business, if not all of the business.
After you identify or hire your next-generation leaders, you can begin the process of documenting and systematizing all of your processes. Having a defined process allows others to easily step into most roles by simply following the processes you’ve created. This is the stage where your business starts to become less dependent on you. A future capable leader and a defined written process for how to do things create space between you and the day-to-day operations. Having defined future leaders, systems and processes in place makes any business significantly more valuable than those that don’t.
Now that the business can function without you, your time is freed up to start fulfilling your needs and those of your family. It can be hard to imagine not having to be tied to your business 24/7/365. It is a process that takes time to adjust to. The real benefit is that you can now envision life outside of the daily grind. For many people, that leads to thoughts about what might come next or life after business.
Most owners I know rarely think about an exit strategy for their business until they are forced to or when they feel completely burned out. This is the worst time to think about an exit. Next week, I’ll cover setting yourself up for an ideal exit from your business, even if you have no intention of leaving it anytime soon.
Securities offered through Kestra Investment Services, LLC (Kestra IS), member FINRA/SIPC. Investment advisory services offered through Kestra Advisory Services, LLC (Kestra AS), an affiliate of Kestra IS. Reich Asset Management, LLC is not affiliated with Kestra IS or Kestra AS. The opinions expressed in this commentary are those of the author and may not necessarily reflect those held by Kestra Investment Services, LLC or Kestra Advisory Services, LLC. This is for general information only and is not intended to provide specific investment advice or recommendations for any individual. It is suggested that you consult your financial professional, attorney, or tax advisor with regard to your individual situation. To view form CRS visit https://bit.ly/KF-Disclosures.
Eric is President and founder of Reich Asset Management, LLC. He relies on his 25 years of experience to help clients have an enjoyable retirement. He is aCertified Financial Planner™ and Certified Investment Management AnalystSM (CIMA®) and has earned his Chartered Life Underwriter® (CLU®) and Chartered Financial Consultant® (ChFC®) designations.
