Published Jan 10, 2020 by Kelsey Seeker
On this video edition of Small Biz Insider, David Tolson discusses the value of life cycle planning for your business. He is the managing partner at Arete Advisors, a full-service wealth management firm.
Here are the top 5 takeaways from David Tolson:
Your business value is more than just profitability.
The biggest challenge businesses face throughout their life cycle is creating value. several factors determine your business’s value, not just how much you sell or how many deals you close. One of the key indicators is your net promoter score. It’s an index to gauge how many of your customers are likely to recommend your business.
As you grow, make sure to professionalize your business.
If you can professionalize your business by putting systems and processes in place and strengthening your management team along the way, it’ll retain more value and be easier to run. Banks and investors use these factors to evaluate whether a company will succeed.
Being dispensable is a strength, not a weakness.
As the business grows, you need to become comfortable with not managing the operations personally so that the business can run effectively. Rely on your management team and the systems you’ve built. Business owners may not like to hear it, but if it’s all about you, then when you’re gone, so is your business.
Small business owners typically have 80-90% of net worth tied up in their business.
If all your wealth is concentrated in one asset or one industry, there is a substantial probability that things may not work out the way you want them to. De-risk your personal finances by transferring some of the value out of the business and into your personal side over time to protect yourself and your business.
Anxiety and stress are common throughout the life cycle of your business but can be managed.
Understand that starting a business is stressful as owners work to elevate their idea and create value and that stress continues as the business grows. Eventually, stress will no longer revolve around survival but complicity. Setting up those processes and systems early on will help alleviate the stress of complexity as the business matures.
Small Biz Insider is a digital series from the Greater Houston Partnership, where we highlight the innovative business owners, entrepreneurs and leaders of the greater Houston area making a big impact in the small business community.
You can also listen to David Tolson’s podcast here.
You can find our other Small Biz Insider videos, podcast episodes and small business resources here.
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