Follow Dallas Linkedin
Email Dallas Email
Financial
Jul 8, 2019

Turning a Lifestyle Business Into a Business Enterprise

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

Many business owners start their companies as lifestyle businesses to support a certain kind of lifestyle that they want. Some found businesses because they have an urge to create and build. Others want to be their own bosses. Still others want to control their own destinies.

Whatever the reason, many businesses start as and evolve into lifestyle businesses. This is great for business owners, their families, and their businesses in general, but it can be a big challenge when you start to plan for the future of your business.

As you start thinking about planning for your business’ future, you might feel that you can plan while continuing to do business as usual. However, planning for the future success of your business rarely means you can continue doing business as usual. For example, many business owners don’t know what their businesses are truly worth. Not knowing what the business is worth might be a part of business as usual, but it makes planning for future success much more difficult.

Likewise, it may be business as usual for you to capitalize on certain benefits of ownership. Things like perks, bonuses, and even personal clout factor into the kind of lifestyle that you might expect for yourself and your family. As you begin to plan for your business’ future, you may find that those benefits could disappear if you leave the business, which can affect your lifestyle.

One way to address these issues is to turn your lifestyle business into a business enterprise.

When we use the term “business enterprise,” we mean that the business must have transferable value. It cannot simply act as a means to support your lifestyle, because it’s likely that the traits that support your lifestyle have less value to, say, a private equity group or strategic buyer. These traits might include things like your personal relationships with customers or suppliers who know and trust you; handshake agreements; or flexible payment terms for your favorite clients. Additionally, running a lifestyle business typically requires your constant presence to assure that the business actually does support your lifestyle.

Lifestyle businesses support you right now. Business enterprises can support you, your family, and often the business itself, both now and in the future.

If it Ain’t Broke, Why Fix It?

For many lifestyle business owners, the very idea of changing a business that brought them the wealth, success, and fulfillment they’re used to can be jarring. “This business has done great things for me, my family, and my community. Why should I want to change that?”

The answer is simple and a bit brutish: Potential buyers typically don’t care about the owner’s lifestyle.

The things that you might consider “good” aspects of a business—supporting yourself and your family, perhaps maintaining a culture—often don’t matter as much when an outside buyer does their due diligence. Where you see strength, they will find flaws. They may question practices that fail to maximize profits and cash flow, even if those practices line up with your values. These facts might cause you to resist transforming your lifestyle business into a business enterprise.

Many of the same factors apply if you ever consider transferring your ownership interest to an insider, like a manager or family member. Insiders look for the same kinds of factors that outside buyers do in a business. While a lifestyle business may adequately support you now, you should think about what happens when you eventually relinquish your ownership interest (whether by choice or otherwise).

Turning a lifestyle business into a business enterprise can be challenging, but there are certain things you can do to begin the transition.

  1. Find or train next-level management: Next-level management can be the catalyst to building on your current success. It’s often an attractive selling point because it shows that the business can run smoothly without you.
  2. Document systems and processes: When your employees know what they need to do to sustain company cash flow and how to do it, it becomes much easier for the business to run efficiently and effectively.
  3. Put yourself in a buyer’s shoes: Consider what you would look for if you were thinking about buying a business. If you discovered a business that supported its owner but also required the owner’s presence at all times, what do you think would happen if that owner wanted to leave the business after you bought it?
© Copyright 2019 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
Mike stonestreet 300x300

Dealing With Water Damages In Your Condominium Building? Here’s What To Do.

Mike Stonestreet - CAMS (Community Association Management Services)
Dane

New Health Insurance Considerations In The “COVID-19 Era”

Dane Scalise - GriffinEstep Benefit Group
Dallas headshot 300x300

There’s More To Business Than Money: Values-Based Goals

Dallas Romanowski - Cornerstone Business Advisors

Trending News

Transportation Officials Comment On Amtrak Plan Involving Wilmington

Christina Haley O'Neal - Apr 9, 2021

Convention Center Used For Mass Vaccination Site

Scott Nunn - Apr 9, 2021

This Year's Parade Of Homes Schedule Announced

Cece Nunn - Apr 9, 2021

Governor's Budget Proposes Funding For Area Education Projects, Attractions

Christina Haley O'Neal - Apr 8, 2021

Riegelwood FCU Merges With South Carolina Institution

Jenny Callison - Apr 8, 2021

In The Current Issue

Worn By COVID, Clothing Firms Pick Up

During a year of going almost nowhere, most people in the Cape Fear region found their clothing could be simple and informal. Galas went onl...


Area Attorneys Chosen For 2021 Legal Elite List

Hundreds of lawyers made Business North Carolina magazine’s Legal Elite list this year. The group included Wilmington-area lawyers....


Truist Rolls Out Blended Branch On Military Cutoff

More than a year after the merger of BB&T and SunTrust banks was finalized creating Truist, the combined company is premiering its new blend...

Book On Business

The 2021 WilmingtonBiz: Book on Business is an annual publication showcasing the Wilmington region as a center of business.

Order Your Copy Today!


Galleries

Videos

Trying to Grow a Business?
2020 Health Care Heroes
2020 WilmingtonBiz 100