In 2007, Jimmie Johnson won 10 races, was in the top five 20 times, and earned pole position four times. It was his second straight championship, earning him the 2007 Driver of the Year in NASCAR. Statistically, it was his best season ever.
Now, imagine the results without Johnson in the driver’s seat.
Would the Hendrick Motorsports team have been as successful without him? If you did not change another thing—the crew, the equipment, the support staff—would another professional driver win 10 races and Driver of the Year?
Probably not. Johnson is simply a special talent.
But as Johnson and Hendrick continued the streak, would that success improve if suddenly Johnson was unavailable? Would an improvement in the people around Johnson, the processes established, and the culture built—would all of that contribute to making Hendrick more successful? Would that allow the club to thrive without Johnson for even a race or two?
Probably. But why do you, the business owner, care about this hypothetical?
One day, you will exit your business. Through good planning with the assistance of a Certified Exit Planning Advisor (CEPA®), it might be on your own terms. Or, you may have an unforeseen exit because of one of the five Ds: death, divorce, disability, disagreement, or distress.
No matter if it is planned or not, desired or not, you will exit.
The most valuable asset for business owners is the business. Owning your own business is an income generator, with most experienced business owners earning a salary that puts them in the country’s top 5%. Owning a business is the clearest way to afford a lifestyle that most people can only dream of: lavish vacations, second homes, and financial freedom.
But what will you do when the income stops after you have exited your business?
Hopefully, through the Value Acceleration Methodology™ and exit planning, you can sell your business for a “best in class” price—a multiple of what businesses in your field are selling for. Hopefully, you sell for a number that closes your wealth gap, which is the difference between your desired lifestyle and your current wealth.
But if your current company relies on your:
…then what would someone be buying if they bought your company?
So, the question really becomes: Do you have a job, or do you have a business?
Could your company even run the race without you in the driver’s seat?
If not, then you need to drive value, and you need to do it as a team to unlock an exponential return upon your exit.
Every year, you gain an understanding of how much your company is “worth.” The quotation marks are there, because the number you report to the IRS every year is not truly how much your company is worth to a potential buyer. Sure, the bottom line of your financial statements is important.
But it is the multiplier that reflects value—and creates exponential return. And it will not show up on a financial statement because 80% of a business’s value is determined by intangible capital.
Every business has four types of capital:
These are the things you will need proof points on when it is time to exit. If a potential owner investigates your business, what will they find? If they find intrinsically motivated staff, customers who have contracts and who are managed by staff beyond the owner, a set of efficient standard operating procedures, and a vibrant culture with low turnover, then that’s a business worth paying more for, perhaps seven, eight, nine or ten times its “official” valuation.
That is a return that can close your wealth gap and maintain your lifestyle post-exit, without the income you are used to earning from your business.
At some point, it is time to leave the driver’s seat. And as it turns out, in business, the sooner you can rely on an entire team to drive value, the better off you will be.
Interested in learning more about Value Acceleration? Visit Amazon to buy a copy of Walking To Destiny: 11 Actions An Owner Must Take To Rapidly Grow Value & Unlock Wealth by Christopher Snider.
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