Productive Pressure Building Wealth

Why Wealthy Business Sellers Focus on Building VALUE in their Businesses, not Just Revenue

When you run your own business, there are 2 distinct paths you can take as an owner: the lifestyle business or the value creation business.

Most owners of professional services businesses begin by creating a lifestyle business.

We do the work we were trained to do – dentistry, plumbing, HVAC – or in my case, veterinary. Except instead of working for an employer, we go out on our own. We build the business over time, adding staff, and growing revenue.

This creates a business where we can make good money to fund our lifestyle.

It’s the dream that a lot of us held when we began our businesses: the freedom to work for yourself, own your own business, and make more money than you would as an employee.

The big problem is that the freedom is an illusion. Once you reach a certain level of success, you find yourself in what I call Owner Overload. The money is good, but it requires so much of your time and effort, that you feel trapped and unable to grow.

Your business relies on you so heavily that it’s hard to take time off – and even if you do manage to escape for a vacation, you spend most of the time worrying about how things are going at work.

On the surface, you’ve created a profitable and successful business. Your financial planner may even have that business listed on your net worth statement with a big dollar value next to it.

But there’s a big problem with this model.

If you, the owner, are at the center of the business – your business isn’t worth anything.

You may be pulling good money out of it, but the business is only valuable when you’re making it go.

Without you, the business ceases to exist.

This makes your business unsaleable – and that number on your financial plan unattainable.

The solution to this problem is to change paths and shift your business to a value creation model.

So what do you need to create business value?

While revenue and tangible business assets make up part of a business’s value, most of the value – about 80% of it – is made up of intangible assets.

We call these the 4 Cs: Human Capital, Structural Capital, Customer Capital, and Social Capital.

The 4 Cs of value creation

Human Capital

Having a team of skilled, experienced, and dedicated employees contributes significantly to a business’s value. Creating synergistic collaboration and fostering a positive work culture makes your business more attractive and valuable.

Structural Capital

This encompasses the systems, processes, intellectual property, and other operational aspects that underpin the business’s operations. Well-designed structures and streamlined processes enhance efficiency, improve performance, and increase the value of the business.

Customer Capital

Satisfied customers become loyal advocates, driving repeat business, and attracting new clients. By delivering exceptional customer experiences and prioritizing customer satisfaction, a business can increase its value.

Social Capital

Social capital refers to a business’s reputation, brand image, and its standing within the community. Positive brand perception and a strong reputation can be a significant asset, attracting customers, partners, and investors, and ultimately adding value to the business.

Build wealth by creating a business that can thrive without you

The most important part of creating value is to decentralize by removing yourself from the center of the action.

Notice that the first 2 Cs above are designed to do exactly that. With the right systems in place (Structural Capital) and a competent team to run them (Human Capital) – you are no longer the linchpin that holds everything together.

Instead, you function as the business leader. You shift your focus to strategy and collaborate with your team to build Customer Capital and Social Capital.

When you create a business that can thrive without your personal involvement, you not only get the freedom you wanted when you started – you also build wealth by creating a business that you could sell one day.

Would you like to accelerate your transition to a value creation business?

I help business owners build a scaleable, saleable, and valuable business.

Your first step is to book a complimentary complimentary consultation with me.

We’ll analyze your current situation and I’ll help you put together a simple plan to build business value and prepare it for sale.

Want to sell your business or get ready to sell? Start here.

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