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Value Creation Blog

Five Things About Passive Ownership You Need To Know

Posted by Josh Patrick

moving into passive ownership I spend a lot of time talking with my Clients about relationship management and their business.  In our wealth management for business owners program one of our modules is how to implement and use a passive ownership program to keep enjoying the cash flow from your business.

Passive ownership program is when you as the owner of your company change your relationship to your organization.  Often this means you move out of day-to-day management and make yourself operationally irrelevant to your business.

The things I think are the most important when considering a passive ownership strategy are:

  • Putting a manual together that documents all of the processes in your business.
  • Understand what the drivers are in your business and build a dashboard that lets you track these drivers on a weekly basis.
  • Have a compensation system in place that keeps your key managers in place.
  • Have the discipline to not mettle in operations once you delegate the responsibility and authority to one or a group of your managers.
  • Allow your managers to make mistakes so they can learn.  When mistakes are made, make sure you ask your managers what they’ve learned.

In today’s environment, moving to a passive ownership strategy is a great idea for those who are over 55 years old.  The market for buying your business is not very good.  In addition, many private business owners haven’t done what’s necessary to make their business attractive to an outsider.

Becoming a passive owner is a great way to get your business ready for the ultimate transition to a third party, your managers, or your family.  In the meantime, you’ll be able to diversify how you spend your time and still enjoy the cash flow from your business.

I believe that making changes in your business that allow for passive ownership is one of the major activities you can do to improve the value for your business.  What are your thoughts?

Josh Patrick

Click on the button below to get our mind map on moving to a passive ownership strategy in your business.

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Securities and Investment Advisory Services offered through NFP Securities, Inc. (NFPSI), Member FINRA/SIPC. Stage 2 Planning Partners and NFPSI are not affiliated.

 

This article is published for residents of the United States only.  Registered Representatives and Investment Adviser Representatives of NFP Securities, Inc. may only conduct business with residents of the states and jurisdictions in which they are properly registered.  Therefore, a response to a request for information may be delayed.  Not all of the products and services referenced on this site are available in every state and through every representative or advisor listed.

Topics: operationally irrelevant, for business owners, passive ownership

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