What is it that you think about the most as a business owner? Chances are they are one of four things:
- What if I don’t want to stay in business and I want to drop out?
- What if I get sick, disabled, or die?
- What if my key person (s) decides to leave me?
- What if I can’t increase and improve my cash flow (life blood of the business), or the economy crashes?
Besides running the day to day of the business, and the stress that goes with this, the four items listed above are probably the biggest stressful thoughts business owners have. Let’s break them down.
Why the typical business owner thinks about these issues, is because they know they put a lot of sweat, tears, money, time into their business. They have most of their wealth in the business, and know that they have no way of extracting that wealth when these events happen!
What if I don’t’ want to do this any longer and just want to drop out?
Think about it! The business owner has most of their wealth and time tied into this business. In most cases it is very difficult to just stop doing what they are doing, lock the front door and leave the responsibility, wealth and reputation behind. They still need their wealth in the business to maintain their life style.
Business owners are human beings and sometimes they just get tired of doing what they are doing, they burn out. Sometimes they feel they are trapped and living a life of desperation. They are making a nice living, and seeking to make a great life for themselves and their families. Chances are when they started the business they were only looking for a place to go, a position, a paycheck, and with a little luck a dream. The stress of running a business can take its toll on the businessman and the family.
They need the wealth they have invested, but don’t have a way of selling the business at a reasonable price. Can the business be sold to an outsider? Or, is there someone inside the company who will buy the business? If so, do they have the money? Is there someone who would run the business while the owner keeps their hands in the business? Or, do they liquidate it? Many times, even if a business owner sells their business, they find that after the taxes and expenses there’s not enough capital at a guaranteed rate of return to produce the income needed to keep the business owner and their family in the lifestyle they been used to. Because of this factor, more stress is added to the business owner and their future income.
What I become sick or die?
If a businessman becomes sick or dies unfortunately in many cases their immediate plans die with them! More than 70% of business owners do not have an adequate buy and sell agreement or instructions about the continuation of the business upon death, disability, or any triggering event. Nobody really knows what should happen to the business. This leads to much confusion not only with the estate of the business owner, but also the surviving stockholder’s as to the future of the business. What’s the price, who’s going to buy, what are the terms, who sets the price and many other questions abound?
Certainly this leads to confusion, time delays and a lot of cost to both the surviving stockholder’s and the decedents estate. Where’s the income going to come from now that the sick or deceased owner is not working? The havoc caused by this situation is unresolved, and reverberates well beyond the surviving spouse and the sick business owner. How about the staff, vendor’s, customers, and even surviving stockholder’s, who are left in the lurch without instructions concerning the future of the company’s status?
The income from the company has been the link pin to the standard of living for the family. The family has relied on it, now there is uncertainty, knowing the business has been adversely affected. No wonder why many business owners worry about the what-ifs.
What if I lose a key person?
Behind most successful business you will not only find a very responsible owner but a well-trained person, or group of people, which we call the key group. This group of people know the business well and keep it running smoothly. They are the team members who play a very critical role in the success of the business, the increasing profits, and the stability of the company. In many cases, they are the group of people which outside buyers are more interested in keeping than anyone else.
They’re the team that have special skills, relationships with important customers, specialized knowledge, and a sense of business savvy that is hard to replace.
This is the group of people who, if they were to leave the company would have a major impact on the company’s profits and cash flow. It’s also the group of people that creates a transferable value for the company for sale.
What happens if the key group decides to go into competition with the owner? What happens if the competition offers the key group members a better offer to work for them? What does a business owner do when they lose key people?
There’s no doubt that having a key group is a double-edged sword. In one way it creates profitability and value, however, in another way it threatens the future of the business if the key group and members are lost.
Most astute business owners will concern themselves as to what happens if they lose their key people. What happens if a group of key people decide they want to start their own business and compete against you?
It isn’t uncommon to see a group of key people who are dissatisfied with business conditions, leave the current employer and bring with them other employees, trade secrets, and clients to a new employer. What do you do when this happens? What happens to your business? What affect will it have if you did lose a key person or key group of people?
What if I don’t improve cash flow?
Most of us would agree that you need good cash flow to stay in business and be profitable. However, what if you could not control cash flow and had a downturn for 90-120 days? What if you had a lawsuit that drained your cash because of litigation and legal action? How about a natural disaster? What if your bank pulled your line of credit?
There are many businesses that run a successful operation, only to be closed by large tax bills and extraordinary circumstances which cost them large sums of money at one time. No matter what the reason, having a slow down with cash flow is a very legitimate concern to most business owners. This is why they are always looking to keep their businesses running as profitably as possible, which is the only defense against a sluggish cash flow. So the question is always, “how do I keep the business running profitably all the time”? Because of this, business owners are always working hard, and always aware of the cash flow slowdown. This adds more stress to their lives. Business owners need to work more on their business than just work in the business!