Is there anything quite like the sweet smell of success?
As a business owner, success is often the key driving force behind building your business. It is the confirmation that your industry knowledge, the money you’ve invested and the long hours spent growing your company have been worth it. For many, it is their reason for getting up in the morning to build on the successes of yesterday.
However, success for business owners can prove a double-edged sword, one that many entrepreneurs recognize too late. “How can success be a bad thing?” you might be wondering. Because becoming too attached to historical successes can cloud your vision for new ideas to grow your business and, eventually, hinder your ability to create a successful exit strategy.
The long and the short of it: If you prioritize success too much, you set yourself up for failure.
This is something Allie Taylor discusses in her article, The Paradox of Success. In it, Taylor highlights how success as a business owner can be a disadvantage if you become too reliant on experiencing it. We recommend reading this article yourself, but we wanted to bring your attention to this quote in particular:
Research from the U.S. Trust backs up this claim, with as many as 63% of business owners lacking a formal exit strategy. Therefore, becoming a victim of success as a business owner can cloud your view of the right time to exit your business, and consequently limit the amount you will receive when the time comes to sell. Simply put, too many business owners try to “time” the market and exit when timing is perfect. Since no one can predict when this will occur, it is far better to create a well thought out, planned exit strategy that matches your financial needs with the realities of the market.
An over-reliance on success impacts your ability to develop the perfect exit strategy in a number of ways:
This last point is especially crucial, and separates owners that are able to PLAN their exit and those that HAVE to exit. Perhaps exiting is the furthest thing from your mind and you’re happy enjoying the successes and challenges of ownership, but it is never too early to start building a buyer ready business. It will save you plenty of headaches in the long run.
As Taylor identifies, middle-market business owners that guard against the paradox of success experience several benefits in growing their company to greater heights, and exiting at the right time for the optimal value. When it comes to selling your business, these attributes will be vital in how much you receive for the years of effort in building it from the ground up. And, above all else, this thinking will help you realize that you are not your business, and place you in a position to prepare for life after it.
Reaching this stage isn’t easy, but our professionals at Generational Equity are experienced at helping business owners achieve this. It starts by attending one of our executive conferences, which are completely complimentary and held regularly throughout North America. Here, you will get a thorough introduction to the M&A process, business valuation models and how to determine the optimal time to sell your company.
After attending, you will be more confident in your understanding of the process and equipped with knowledge of the planning it takes to exit for the optimal price. Therefore, the successes in building your business will carry forward into a successful exit strategy – one that will attract the right buyers and secure your financial legacy.
The Bottom Line: Success in business is what we strive for, but don’t let it consume your life. By not becoming a victim of your own success, you open your mind to opportunities that increase your company’s valuation and better prepare yourself for life beyond it.
You can discover when and where the next conference in your area is on our website – www.genequityco.com. Alternatively, you can contact us directly on 972-232-1121 to learn more about Generational Equity’s award-winning approach to exit planning.
And special thanks the National Center for the Middle Market and Allie Taylor, Principal of Orange Kiwi, a consulting firm helping business owners prepare for the eventual transition from their companies. If you would like to read the entire article from Ms. Taylor, follow this link: The Paradox of Success.
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