"What are the three major factors impacting privately-held businesses?" I often ask when speaking to a room of hundreds of owners. Here are some of the most popular answers: Enough capital to expand; customer retention; innovation of products/services; the right employees/team; the right economy; and more answers. These are all important factors, however, the correct answer is: Timing, Timing and Timing. You see, the goal for any owner is simple--to be able to cash out anytime profitably.
Many owners are confused about using the terms exit or cash out or ROI when speaking of retirement. Ninety-five percent of owners tell me that they believe to exit or cash out means retirement. Do you think Mark Zuckerberg (CEO of Facebook) is going to retire any time soon after successfully cashing out Facebook through the IPO earlier 2012? If you said, "No," you are right.
Many owners end up waiting until their exit is triggered by the five major exit triggers before even thinking about or planning their exit or cashing out. Unless you build your business with the intention to create equity value, you may or may not be rewarded for the RISK you took to start and operate your company over the years.
As the owner, you deserve to know what makes a business valuable from the investors' or buyers' perspectives, considering that huge risk you have taken. By learning about and applying the three major categories of mission critical activities explored in my newest book, Work Toward Reward, you can begin to build business equity value. That's right. You must decided to work toward reward--the reward that equitably compensates the risk you've taken!
When I wrote my first award-winning book, Show Me The Money--Run Your Business like a Prosperous Investor in 2009, I uncovered many statistics about privately-held business revenue, industry, growth rate, etc. However, there was very limited information about privately-held business owner financial behaviors. The financial behaviors I refer to are the mission critical activities owners intuitively conduct in their business with or without any external guidance.
These mission critical activities help many successful owners create equity value in their company, allowing them to be in the best position to have the option to cash out their business anytime--regardless of external environment changes such as economic conditions, competition or industry.
Our study shows that 67% of owners are in business because they want to make more money and become financially independent. Their company success mostly comes from their passion and their ability to leverage the right set of mission critical activities. Yet many owners, especially women owners, tell me that they are not in business to become the next Mark Zuckerberg (CEO of Facebook). However, our study shows 80% of owners need to and want to know more about how to convert the value of their company into cash.
Through two years of studies with hundreds of owners, the data collected through the assessment of these twenty-three mission critical activities indicated that owners are missing a huge opportunity in their companies--an opportunity to create owner's equity value that can sustain financial independence in the long run.
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Chia-Li Chien, CFP®, PMP; Succession Strategist, Award-Winning Author & Speaker. She is CEO of Value Growth Institute dedicated to helping private business owners increase equity value of their firms. Her blog and newsletter was named a top small business resource by the New York Times. For a sample chapter, go to your Kindle to preview the first chapter for free, then enjoy the entire book digitally for just $9.99 http://amzn.to/QVoBTs
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