By Jim Crocker, CEO of Boardroom Metrics
For the past 15 years I’ve spent much of my time diligently consulting to private business CEO’s. All of them with a dream – that one day they will exit rich from their businesses.
Without much questioning, I’ve worked with these CEO’s to ‘build their business” – believing as they did, that generally, the keys to a successful exit down the road lay in maximizing growth and profits.
What I know now is that’s not true.
The keys to a successful exit lie in building a private business that has value – and for a private business to have value, being profitable isn’t enough – those profits need to be sustainable and transferable.
Sustainable profits are those that have a chance of carrying on in to the future. So being in a declining industry or milking a product that hasn’t been upgraded in 10 years will hurt chances of a successful exit.
Transferable profits are those that can be generated regardless of who the owner is – they can be easily transferred to someone else.
This is where many, many business owners fail.
They fail because they are the heart and soul of the business. The business is their baby. They created it and they have all the customer, supplier and key staff relationships. They know the product – although not necessarily their industry (many become isolated) – better than anyone.
So, if you’re the owner and first time CEO of a private business, here’s something to think about. Do you think of yourself as the owner first – or the CEO?
The role of the owner is to build a valuable asset – a company that produces sustainable and transferable profits.
The role of the CEO is to manage the day to day. Observation – most private company owners relish the CEO role.
Which are you?
For more insight on building a valuable business check out this Slide Share presentation.