GROW 2 EXIT!
Cycle of Success
“It’s not what you make; it is what you keep”.
Without “making it”, though, there is nothing available to keep!
What then are the critical steps to growing…and what do we need be doing to prepare for exit?
Consider where you are in the T6 CYCLE (aka the “business circle of life”!)—
TREASURE.
Aggregate capital to grow. Capital can be financial, human, or intellectual.
Money in the bank (or from friends and family).
A team ready, willing, and able to do what needs done.
A concept which is the better mouse trap for some established market need.
TRANSACT.
Buy something missing in your Treasure mix
Leverage equity with debt
Hire the skill your team is missing
Manufacturer a prototype of what is now just a dream.
Transact and Treasure are the “ying and yang” of business – one does not exist without the other.
TRANSFORM.
Make what you acquired better by application of the magic of your business. When you get stuck in the “treasure to transact” cycle you end up with a garage full of unsold dreams inventory!
At some point, ideally too soon versus too late, leadership embraces some version of third-party governance, to provide timely insight as growth gains a velocity overtaking strategic planning.
TEAM.
Smart farmers rotate crops, to maximize production - over time - from the soil.
As with crops, the leader/owner must rotate team members in roles best suited to their then skills and future needs.
When a firm is young, everyone is a generalist, needing be involved in everything. To maintain substantial growth, specialists are developed to do exceptionally well in key aspects of the business.
One of your roles as leader (and as member of the board), is to anticipate the needs of your growing enterprise by investing in team members to develop skills which will be needed down the line.
Remember that the ability of your team to function WITHOUT you daily guidance may drive the value of your business to a prospective joint venture partner or buyer.
TAXATION.
Time value of money suggests that money saved today on taxes is more valuable than if in the future. While this can be myopic, as some benefits of tax planning (e.g., Qualified Opportunity Zones) can have multi-generation wealth impact, instill a culture where every dollar saved is leveraged to drive productive growth.
TRANSITION.
In the end, we all die.
The process of living, knowing we have a limited time on earth, can make the business cycle delightfully challenging!
While we will all face, at some point, no longer being the center of our business universe, our eventual transition helps feed our drive to continue the T6 CYCLE!
BOTTOM LINE.
A business can be a series of “Grow2Exit” experiences.
Sell off a building you acquired – with Other People’s Money – and transformed with cost effective renovation.
Your team gains confidence from experience
You use a 1031 like kind exchange to delay recognition of capital gains taxes
Your banked takes you to Monaco to celebrate your successful transition!
We can be in several stages of the T6 CYCLE simultaneously. We succeed best when we, like a six-cylinder engine, lean into maintained all aspects of the cycle all the time.