The Most Important Business Decision You Will Ever Make

By
Joan M. Ridley, CFP™, CEPA, CBI

What was your goal when you started your business?

To create a nice lifestyle for yourself , or
To create personal wealth

The answer to that question will drive how you view your business, the role it plays in your life, and what you hope or plan to get out of it.

What Kind of Business Owner Are You?

If your goal was option one, then you have what we call a Life Style Business. If your answer was option two, you have what we call a Wealth Builder Business. The major difference is, one generates personal income and the other creates personal wealth.

The Lifestyle Business might generate considerable income for you personally, but, you probably are not reinvesting in the business, and, when you leave it there might be nothing of value to sell. At best, you might be able to sell it for a small down payment and a portion of the gross revenues for a stated period of time. In other words, you will probably need to finance it for your buyer, and your choice of buyers might be limited.

The Wealth Builder Business is likely to generate good cash flow for the business and a reasonable salary for you. When you sell, the acquirer will likely pay you a reasonable down payment, you will finance a small portion, and a bank will finance the remainder. Because your business will be bankable, you will not need to finance the entire transaction. If you are running your business like a business and observing the 54 value drivers, you could be creating significant wealth.

Determine from the outset, what your goals are and then start planning from day one if you wish to build an asset to sell, or, if you want to have a high-paying job but little to sell when you leave. If you are a Wealth Builder Business and want coaching to prepare to unlock your wealth, or, if you are Lifestyle Business and want to become a Wealth Builder, please click here to learn about our Business Coaching Program.

Joan M. Ridley is a Certified Financial Planner™, a Certified Exit Planning Advisor, and a Certified Business Intermediary. She is President of Business Wealth Solutions, a Dallas-based advisory firm that helps lower mid-market business owners grow and harvest business wealth. Joan sits on the Board of Governors of the Exit Planning Institute. Please call 214-692-9192 and visit our website www.bwsllc.net.

Copyright 2011 Joan M. Ridley