Before You Start a Business, Be Sure You Can Sell it or Pass It On

  

 

 

An older gentleman had just offered me one of the most expensive cigars on the market, but I politely declined as I don't smoke. I did notice that his wife seemed extraordinarily happy however. I have to admit we were in a pretty swanky, exclusive environment. He asked if I was a first timer and I told him I'd actually been there several times before. As the conversation continued, we eventually began inquiring about careers. He was an entrepreneur in the medical services profession who had just sold his company. Inquisitive, I began asking about the process of putting it up for sale. "I didn't", he exclaimed. "Of the four major competitors in the region, I was number four but the number two and three guys didn't want a fourth competitor. So they approached me about selling." He went onto say he didn't necessarily want to sell so he threw out an absolutely ridiculous number in hopes of getting rid of them and I can assure you it was many millions of dollars. The guy who approached him said, "I will get back to you in two weeks." The gentleman thought to himself yeah right. Two days later, the buyer called back and quadrupled his asking price. The old fellow said it literally took everything in his body not to [defecate] himself. He said he knew his heart stopped as he tried to keep a straight face. Needless to say, he sold and headed to a secluded island where I met him. I immediately realized why his wife seemed so happy.

 

I talk regularly to people who want to start businesses, less to those who want to sell them and even less to those who have already sold. Most are convinced that the way to the proverbial promise land is through starting and selling a business. In the words of Mark Twain, "It ain't what you don't know that gets you into trouble. It's what you know for sure that just ain't so." Whether you feel you know the way to the promise land or not in terms of business creation, I simply urge you to look far off into the future which is something I try to practice more than I preach. I don't focus so much on my next five years. I think about where my bank account and lifestyle might be in three decades. That lends itself to entrepreneurial thoughts but more importantly the closing table and business sold thoughts. Before you proceed or continue if you've already started, there are a few things you should consider.

 

Do You Own Your Business or Does it Own You?

Many people approach business creation backwards. It's important that you find a problem or a need and fill it. That gives you a much better shot at revenue generation and sustainability. Unless you're brilliant like Stevie J. and can create a thing called the IPOD before we realize we even need it, I would stick to finding a need first. Still, you have to keep in mind that nobody wants to buy your problem child. People want ultimate control of their time and money and they want to do it without sending their blood pressure through the roof while making their hair disappear. Too many business owners like to talk in a very braggadocios manner about how extremely busy they are. Newsflash, regardless if you're making $10 a day or $10,000, if you're up to your neck in work that can't be delegated, you're no closer to riding off into the sunset than the underpaid guy in the cubicle who's likely happier as he's about to clock out and have a cold one.

 

Junior May Not be Eager to Take the Reigns

We can't even assume that successful businesses will become family dynasties unless you're like the Trump family where the kids will instantly become rich and famous at the same time. There is some guy running Joe The Plumber, Inc who earned $250K for the last twenty five years and sent his kid to the Ivy Leagues for bachelors and masters degrees in hopes that the kid would come back home and increase the family trade. The problem is now that junior has been exposed to the kids of Presidents and CEO's, he's about as interested in picking up a plunger as he is going to                     K-Mart.com to ship his pants despite an instant salary and title that is far above what he'd gain as a first year consultant.

In an earlier newsletter, we talked a bit about business process and fortunately it was well received. The gentleman who sold his business had a system in place that ensured he didn't have to be there 24/7. No one is willing to give you top dollar for some disaster that they'll have to babysit all day. Why would they? A regular 9-5 job is much easier. People will gladly buy your business if it has a proven process, strong revenue and growth potential. These items may sound obvious but I come across quite a few people who are busily running in ten different directions trying to start or run five businesses when they haven't mastered the first one. Focus on one, master it and you can prepare for a glorious liquidity event in the future.

 

In Case a New Business Just Ain't So

So as to not leave out the many readers who are not entrepreneurs yet still fight to get and stay ahead, I remind you that you are still very relevant to this conversation. I've heard many say, "You'll never get rich working for somebody else." I couldn't disagree more. You don't have to be a Fortune 500 executive to live a dream life without financial concern. Still, if nobody is signing you up for a golden parachute upon corporate exit, you can make a lot of money through savings and smart investments. An aggressive 401K plan and careful spending can generate a pile of cash over a twenty year period. Add in a piece of investment property or two and you can live out your wildest dreams. The precursor isn't so much the money. The long pole in the tent is usually the one you have the most control over. Most people don't live out a dream life because they lack money, they lack a dream. Define your dreams, set a strategy to achieve them and go about the business of making them happen. You can live a great life just pursuing them.

 

Conversations I used to hear a lot of were from people who wanted to retire by 40 or 50 years old. My question was then and remain is to do what? In three weeks you'll catch every fish in the pond, get on your spouse's last nerve and be bored out of your mind. Retire three decades ahead of schedule and you'll put yourself in a great position to live a long life and run out of money by the time everyone else starts to retire. I don't think you want to look for a job at 70.  

 

Regardless if you're the creator of your riches or simply a good steward of those who provide you opportunities, ensure that you enjoy life in the short term with a watchful eye and a strong exit strategy for the future.  After you liquidate your business to the kids or to the highest bidder, I'm sure your spouse will be noticeably just as happy as the elder statesmen's wife. There are plenty of empty seats in paradise. Are you free for dinner? Let's work!

 

**Shouts out to the Eleazer family on your new venture. Be sure to keep the helipad free when you charter the mega yacht in the Mediterranean. I want to arrive in style.