In business self-sustainability the business owner is removed from the operation and management aspects of the business while allowing the business to continue generating a profit. Succession is the term frequently associated with business self-sustainability. Some may call it exit planning, however exit planning is the transfer of ownership of a business not leadership. Here is another article titled Succession Planning vs. Exit Planning Which Do You Use to learn more on the difference.
The reason business self-sustainability is so fundamentally critical is if the business owner is a variable in the business’ ability to be profitable and scale because the top end of success is directly tied to the owner’s capacity. This impacts the value of the business!
No matter which exit strategy, sale of the business, pass the business on to the next generation, merge with a large corporation, acquisition by a private equity company, growth into the next major corporation, or any other number of outcomes, removal of the owner will be a requirement for success. In many instances this is done by the entity entering the business. In this case, value of the company is always discounted to account for the owner’s transition.
However, if an owner can accomplish business self-sustainability while still in the business he/she has many different options available. This includes one option many owners don’t consider which is holding the company as an investment in their portfolio and stepping away from the business. In this instance, the business’ net profit becomes the owner’s income source indefinitely!
How would you like an indefinite source of income!? But how do you create business self-sustainability?
Business Self-Sustainability Helps with Business Growth
Easily, by growing the business through the first three stages of the business growth model. This process is documented in the book Business Growth Simplified: How to Rapidly Create a Self-Sustaining Business.
The business growth model is a systematic method for growing the business. It details the critical success factors stage by stage to create a foundation from which the business can thrive. Each stage has one and only one goal. Achieve the goal and the business grows organically and achieves the next stage of growth.
The stage I goal is to achieve consistently breakeven within the business. If you think about this, it’s obvious. If the business doesn’t have enough money to cover its bills how can it survive. So, when starting the business breakeven needs to be the one and only focus by the owner.
Next in stage II, adding profitability is the main goal. If you can cover your bills and make a little extra you can make a life for yourself. This is what most business owners think and stop here. However, if owner stops at this point, they are still tied directly to the business’ operation and profitability.
To achieve stage III the business needs to become self-sustaining. That is, it needs to operate without the owner being an integral part of the day-to-day operation and management of the business. This means hiring a successor and putting systems in place to assure that the owners desired customer experience and quality can continue without his/her physical presence. This is easier said than done and is why most small business owners never reach the self-sustainability stage
There are two possible goals in stage III. The first is to sustain the business’ current status quo without the owner being involved. This is often referred to as a lifestyle business. The second goal is to grow the business into a large corporation. Many business owners try to do this themselves and get stuck because subconsciously they started the business to get out of the corporate grind. However, the next stage of the growth model, the rapid growth stage, is all about creating a large corporation which means rapid scalability on all fronts.
Business Self-Sustainability Key for Scalability
At its core business self-sustainability puts the foundation pieces in place to allow you to easily scale your company. Think about some of the other exit strategies which are typically discussed in business transition. The reason anyone would be interested is that they saw potential to scale the business in some manner. With the business already at the self-sustainability stage the business has the capability to grow with the current owner, or to grow with someone else at the helm. This is the real value of business self-sustainability.
In any business transition, succession of the owner in some form needs to be successfully executed. If it is not completed ahead of time the process will take 3 to 5 years to accomplish. I have consistently achieved the business self-sustainability stage with any company, even startups, in 3 to 5 years. So, why wouldn’t you work to get your business to this stage from day one? Most business owners don’t because they don’t even know this is a possibility, and therefore never try to achieve it. Instead they take the advice of most trusted advisors that say grow the business to a large size and sell it as exit strategy.
So, how do you get started moving your business on the road to business self-sustainability? Begin by assessing your business’ stage of growth so that you can determine your highest priority objectives. There is a self-assessment within the book Business Growth Simplified available on Amazon. Or contact BGS about having one of our certified consultants complete our detailed business growth assessment.