Do you know what kind of business owner you are? This is an important question business owners need to ask themselves. Ask yourself: “Are you a lifestyle business owner or a value accelerator?” Kent Bernhard asks this question in his article in The Business Journals, entitled, “Are You Living For Today As A Business Owner Or Building Value?” The answer to this question goes to the core of how a business owner defines success.
The principle of a lifestyle business is to sustain a particular level of income for the owners. Lifestyle business owners look to other investments to build long-term wealth for retirement.
Business owners who are lawyers, consultants and accountants often fall into the category of a lifestyle business. The business generates enough revenue to provide a comfortable lifestyle. It does not have the equity or infrastructure to remain profitable once the owner walks away. The business only has value as long as the owner is working in the business on a regular basis.
Value Accelerator Business
A value accelerator focuses on structuring a business that is a growing financial asset. The business owner looks beyond revenue and profit to such things as human capital, the market in which the business operates, the management team, processes and the strength of the company’s brand separate from the owner.
As Bernhard points out, “To build a business as an asset, you have to become a value accelerator who looks beyond whether the business’ profits are sufficient to maintain your lifestyle. It means looking at the business as an entity outside yourself.” Value accelerator owners focus on how to create value for the business as a financial asset that can operate independently.
Making sure that your business can continue on without you involves have a coherent and focused plan. Plan in advance how you will exit your business. EBIT Associates can help you establish an exit strategy.