Are you building a Legacy Business or a Profit Business? This is an important question every business owner needs to answer before they launch. But most don’t even know they should ask this question at all let alone when. And if a business owner does think about how they’ll eventually exit their business, they often don’t know how to take action on their vision.
Legacy vs Profit
Most people think they’re creating a Legacy Business, when they actually have a Profit Business. In a Profit Business, you (and your time) are the most valuable asset. You’ll keep expenses low, profits high and pay yourself regularly. You’ll make withdrawals of profit along the way that you’ll use to build your Freedom Generator outside your business.
Creating a Legacy Business takes a considerable amount of legwork and money up front. That’s because the goal for a Legacy Business is to be sold for a profit that fuels your Freedom Generator in a significant way. You can take out profit along the way, but generally you’re putting all your energy toward increasing the value of the business with an eye toward the eventual sale. You’re hiring the right skill set of highly qualified individuals and offloading time-consuming tasks that slow growth. Your business needs to run without you, because you won’t be involved forever.
So how do you know which camp you’re in?
Hint: By your ability to answer these five critical questions:
Question #1: “Who would buy your business?”
Would a major company in the industry you’re working in want to acquire your business down the road? Or, can you envision multiple types of companies that would see your business as an asset? Having a potential answer to this first question is important in determining so many things—not only the type of business you have but the direction you’re going.
Question #2: “Why would someone buy your business?”
While we all like to think of our business as the most amazing start-up on Earth, others need to see it that way, too. Consider the following: Would someone buy your business for the people in it? Would they buy it for new geographic footprint? Or because they want to own a piece of your patented technology?
Question #3: “What would they value within the business?”
While similar to question number two, this question digs at the specific tangible value your business offers. This can include your profit margins, recurring revenue, assets, database, growth potential or any number of other variables.
Question #4: “How do they calculate the value of the business?”
There are many possible answers to this question. Would a potential buyer value your business on a multiple of profit? Or are they driven by the value of the number of unique visitors per month to your website, as is the case for successful blogs?
Question #5: “How much do you need from the sale to build your Freedom Generator?”
This question, while last, is perhaps the most important. You need to know the number you’re aiming for, and then build your business to reach that value. This is the money you need to fuel your Freedom Generator in one lump sum. If you need $5 million for your Freedom Generator, and you know that someone would buy your business for five times your recurring revenue, you’ll know whether or not you need to increase your recurring revenue to stay on track.
If you can’t give a detailed, well-designed answer to each of these questions, you’re not building a Legacy business model … yet.
But that doesn’t mean you can’t still build one!
As long as you remember your end goal is Freedom, and your business goal is to create a self-sustaining venture, you’re off to a great start. Working closely with one of the amazing MindShift.money Specialists will help you create the structures you need to establish your Legacy business while you focus on growth strategy.
image credit: Bigstock/Gearstd
Makaylah Rogers is the co-founder of MindShift.money. She is a Thought Leader for her generation, teaching people how to rewrite their “money rules.” With an extensive background in wealth building and personal development, Makaylah’s path has taken her into executive roles in various fields including launching startups, real estate sales and motivational keynote speaking.