How to create a cash draining business
I will bet my morning coffee that the business you run is your single most important asset. It is also the one asset that you have the most ability to influence.
If your goal is to sell, or reduce the time you spend in your business over the next 5 years, there are several things you need to put in place.
As you sit outside your business and look in as the investor, think about whether you would buy this business that you have created and live with every day. If you would, how much would you pay and how much as an investor (doing no work or hustle for the business) would you expect as a return on that money?
As the owner, you have a role that is hidden – the investor
“the role as investor in your own company, next to your role as CEO, Founder and Hustler in Chief,…create that role for yourself to the best of your ability. We believe that by extracting the role of investor and giving it form, content and a place in your business life and teaching you to fill that role, you will significantly improve your chances of creating lasting value in your company and to create lasting prosperity for you and your family. “
Sir Steven Wilkinson – The Entrepreneur as Investor Course 2019 Beta ”
As the investor, stepping out of the daily operations is critical to maximize the value of your business for an eventual sale.
Doing these things will lower the value a future owner will pay:
- Keep your salary below the market and create the idea that your company does not have enough profit to pay the next owner of the business, or pay the loan off that they need to purchase your company.
- Mix personal and business expenses so you never have clarity to see your real profit.
- Involve yourself in every decision.
- Don’t set goals for you business growth
- Don’t hire professional help to guide you.
- Take every sale, even the ones that stress your resources
- Don’t do your bookkeeping.
- Pull money from the business every chance you get.
Instead, to grow the business value, you can:
Create systems that run smoothly translate into more value and daily ease of operations.
Document how you hire, sell, service your customer, and market.
Growing your employees’ skills and encouraging them to step up and take ownership is a skill that will pay dividends.
To get out in five years, you need to work hard at each of these items:
- View your business as an investor.
- Create systems so anyone can succeed in their role at your company.
- Keep personal and business expenses separate.
- Encourage employees to own their work.
In the end, you will be able to run your company and not have your company run you.
What have you done to improve your business this week? Book a 15 minute video call with me today.