The first step in business owner wealth management is having a financial plan that provides a blueprint for what you need for financial independence (see our last newsletter on Financial Planning for the Private Business Owner.) The next step is to drive value creation in your business. For most owners of private businesses, this is either the first or second most important thing you can do to insure that you will be able to leave your business in the manner you want, when you want.

Creating value in a business requires not only tactical excellence, but strategic excellence as well. When you have a business that is tactically excellent, you have often put together a company that provides a nice job that pays a very nice salary. If you were to step away from the business for an extended period of time, your business would probably work less well and even go out of business.

This brings us to the first thing you need to do in creating value in your business. You must make yourself operationally irrelevant in your business. By doing this, you now have gone past creating a job for yourself to having a business that can run whether you are there or not. Once you have done this, you now have a business that others would want to own.

Making yourself operationally irrelevant in your business also allows you to start moving to a Stage 2 business. This is where the business goes past operational excellence and achieves strategic excellence as well. For a business to make this transition, the owner of the business must learn not only to think strategically, but to act strategically as well. We find that most business owners are good at thinking strategically, but never have the time to put those thoughts into actions.

When business owners makes themselves operationally irrelevant, they create personal capacity for changing what they do at work. The owner can now start spending time on strategic activities which can increase the value of the business in two ways. First, the profits and cash flow from the business should improve, and second, a potential buyer will not only pay for the cash flow the business creates, but also the technology for creating the additional cash flow.

For example, if the owner of the business learns not only what the intellectual capital of the business is but also learns how to charge for that intellectual capital, they can sometimes double or triple the value of the business. If the owner learns how to segment the businesses customer base and only allow its sales department to sell to the most profitable Customers, the business value will increase. If the owner of the business learns to segment the business into very profitable niches and then finds ways of finding new niches, they will increase the value of the business, often by a factor of two or three times.

Increasing the value of your business requires tactical excellence first-that is the price to play in the world of business value creation. Once you do this, then strategic excellence compounds the possibilities for value creation. With strategic excellence you will develop the personal capacity to spend time on things that are important, but not urgent. This is the green zone of time management, where you are controlling your business and your business is not controlling you.

At Stage 2 Planning we've developed several tools to help you in this quest. Give one of our Advisors a call and they would be glad to review what you can do to increase personal capacity and drive the value of your business upwards.

With warm regards,

Stage 2 Planning Partners

Josh Patrick © 2007

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