Follow Dallas Linkedin
Email Dallas Email
Financial
Mar 5, 2020

Strategies For Reducing Risk And Improving Outcomes

Sponsored Content provided by Dallas Romanowski - Managing Partner, Cornerstone Business Advisors

As a business owner, you make decisions constantly that you believe will reduce your risk and/or improve your business outcomes. There are countless ways to do this. In this article, we’ll present ways to leverage your internal strengths to reduce risk and improve business outcomes. We’ll also show you how these strategies can affect your longer-term, post-business planning.

An effective strategy for reducing risk and improving outcomes is having a management team that can run the business in your stead. There are numerous benefits of having such a management team. First, it reduces your company’s reliance on you. This can give you more time to focus on the biggest goals you have for yourself, your family, and your business.

Second, it can act as a source of new ideas to improve the business in general. This is especially true if your management team has a diversity of experience. Different experiences can lead to different, sometimes unconsidered, strategies to improve business outcomes.

Third, it often increases the value of your business. Whether you hope to sell to a third party or an insider, or even work until you die, having people other than yourself who can keep the business humming makes it more attractive to potential buyers.

Having a strong management team also ties into your long-term, post-business planning. If you hope to eventually sell your business to insiders, the management team may end up being a qualified buyer, or they may be critical to supporting your children as they take over leadership. This can give you a head-start on bolstering future performance for a strong and healthy company, leading to a more successful transfer.

For example, incentive plans for your management team give them more responsibility, which lets you determine whether they’re fitting successors or high-level executives. Incentive plans also motivate the team to continuously improve the business because any rewards are contingent on achieving goals that contribute to your future success. This can allow you to wind down your responsibilities without giving up control while increasing your income, reducing your risk, and improving your outcomes.

To take it one step further, a common misinterpretation is that owners must transfer all of their ownership to insiders at once. This isn’t necessarily true. There are many ways to transfer portions of ownership over time, which are often tied to good incentive planning. This can keep you in control while you delegate more responsibilities to other people. It also gives you an out if your management team proves incapable of meeting or exceeding expectations, which protects you against risk.

If you intend to sell to a third party or work until you die, you can set up different kinds of incentive plans to make your desired path and tenure easier. You might consider a “Stay Bonus” structure in your incentive plan. It rewards managers who stay with the business through and after you transition out of it. This reduces the risk that important players will abandon ship and negatively affect your company’s value.

How can you know whether you have a management team that can reduce risks and improve outcomes? A good indicator is how the business operates in your absence. If you’ve ever taken extended time off only to find yourself addressing business issues on your time off, it’s likely you don’t have a strong management team (the same applies if you feel like you can’t ever take extended time off). If you aren’t confident that your management team can run the business well without you, you may want to consider finding managers that can.

To reduce risk and improve outcomes, you’ll likely need to look outside of yourself. But this can be extremely beneficial to yourself, your family, and your business. However, leveraging your internal strengths (or finding strong external managers to join your company) can take time. This means that it’s likely in your best interest to start this planning now, before you absolutely need it, rather than when you need it.

If you’d like help in working through the ways you might reduce risk and improve outcomes in your business, please contact us today.

Welcome to Cornerstone's Exit Planning newsletter. We'll provide you with practical tips on planning your business exit twice a month. Click here for a complimentary planning assessment. Contact us with any questions or to help get you started with the planning process. Enjoy! Dallas RomanowskiChip Mayo, and Mike Leannah

© Copyright 2020 Business Enterprise Institute, Inc. All Rights Reserved
As a member of the Business Enterprise Institute (BEI), Cornerstone Business Advisors is an authorized distributor of BEI’s content and Exit Planning Tools.

The Cornerstone team includes former C-Level executives, successful entrepreneurs and advisers who offer unmatched experience in delivering advanced, custom-tailored, results-oriented solutions for business leaders. As a member of the Business Enterprise Institute (BEI), Cornerstone is an authorized distributor of BEI’s content and Exit Planning Tools. We developed the Performance Culture System™ to help clients implement best practices and drive high performance throughout their organization. For more information, visit www.launchgrowexit.com, call (910) 681-1420 or email [email protected]
 
 

Other Posts from Dallas Romanowski

Bizjournalblockad
Ico insights

INSIGHTS

SPONSORS' CONTENT
Burrus rob headshot 300x300

Masters Of Science In Finance 4+1 Program At The Cameron School Of Business

Robert Burrus - Cameron School of Business - UNC-Wilmington
Carolinemontgomery4

New Dec 2020 Government Stimulus and Programs

Caroline Montgomery - Adam Shay CPA, PLLC
Capefearrealtors tomgale headshot

Promoting The Affordable American Dream

Tom Gale - Cape Fear REALTORS®

Trending News

AG Clears Novant Purchase Of NHRMC

Neil Cotiaux and Vicky Janowski - Jan 21, 2021

NHRMC Giving Community Vaccinations At Local Movie Theater

Christina Haley O'Neal - Jan 21, 2021

Apartment Market Remains Robust

Cece Nunn - Jan 22, 2021

Expansion Planned For Porters Neck Community

Cece Nunn - Jan 22, 2021

OPINION: Mapping Local Nonprofit Sector's Future

Chris Prentice - Jan 22, 2021

In The Current Issue

Food Trucks Roll Through Pandemic

The concept is simple: When health barriers reduce the number of people who can eat at your restaurant, take your food to where the people a...


Giving It A Shot

Faced with a limited supply of vaccine doses and other challenges, local leaders are starting to roll out plans to convince as many peo­ple...


Boutique Hotel Responds To Pandemic

The first year of business is the most tenuous, no matter what, but add a pandemic to that year, and it becomes even more tricky. Find out h...

Book On Business

The 2020 WilmingtonBiz: Book on Business is an annual publication showcasing the Wilmington region as a center of business.

Order Your Copy Today!


Galleries

Videos

2020 Health Care Heroes
2020 WilmingtonBiz 100