Does your business have real longevity or is it a temporary entity that will vanish the second you stop working on it? In his insightful article in The Business Journals entitled, “Are You Living for Today as a Business Owner or Building Value?” author Kent Bernhard asks readers a very important question: “Are you a lifestyle business owner or a value accelerator?”
Many business owners have never stopped to ask this basic question regarding their businesses. Since it’s one that all business owners must stop and ask at some point, let’s consider it now.
As Bernhard points out the core issue here is how a business owner defines the idea of personal success. Is owning a business that serves primarily to support your lifestyle success to you? Chuck Richards, the CEO of CoreValue Software suggests, “At the end of the day, a lifestyle business is just a job.”
Richards goes on to point out that this is fine for many people. But, owning a business that does not do more than provide the owner with a job is a choice. Therefore, lifestyle business owners should be aware that they are, in fact, making a choice.
Business owners who are lawyers, consultants, and accountants often fall into the category of those with a “business as a job.” They fail to accumulate enough assets for their business to really be more than that. Summed up another way, the business generates enough revenue to provide a comfortable lifestyle. However, it does not have the infrastructure or equity to remain profitable, or even in existence, once they walk away. As the owner and operator of the business, they are vital to its very existence. This means the business only has value as long as the owner is working in it on a regular basis. As a result, the owner may never really be able to exit the business.
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.” Those who fall into the value accelerator category, focus on creating value for the business as a financial asset that can operate independently.
Making sure your business can continue to function without you means that you must build it. That involves having a coherent and focused plan. To ultimately create value for the business entity itself, a plan must be in place that allows for your successful exit.