In his 1977 memoir about the Vietnam war, Dispatches, Michael Herr describes how the longer you serve, the greater your risk of being killed or wounded is. The law of probability is against you, despite how much more battle-hardened you might become.
The longer you do something, the better at it you become and the more capable you are. But you can be operating in a context where your risk increases at the same time as your experience.
Time is also a risk if you own a business.
The Longer You Leave It…
Paul Dodgshon, of Uscita Solutions, observes how timing is crucial if you are thinking of selling your business. “The longer your business is running, the greater the risk,” he explains .
“Until you sell your business you have value, but little liquidity – cash. It is liquidity that then gives you more freedom. However, the longer you hold on and the bigger your business becomes, the greater the risk can be for you.”
Tiring of Risk
“Early in the stages of running a business, owners are more likely to feel confident and ready to take on more risks in the pursuit of growth,” Paul points out. “At this point, a business may not have much value to lose, which makes taking chances more attractive.”
Moreover, not being risk-averse is essential for growing a business, but, over time, attitudes to risk can change.
“People tend to become, naturally, more conservative as they get older, with an increasingly cautious approach to life. As you get nearer to selling your business, or cashing in, the less risk you will take with what you have built”
This may mean that business owners then feel taking risks might mean greater damage because the business has that much more value to lose.
“They may also not feel they have the time, or even inclination, to want to keep fixing things and fire-fighting,” Paul comments.
However, the catch is that reducing risk-taking can then mean that the business itself is in danger of losing its value, if being cautious slows growth as a result.
Making a Smart Business Decision
Having one eye on the exit makes good business sense, Paul explains. “It’s a smart business decision,” he says.
For entrepreneurs, looking at options for the future should be built into their thinking. Also, if a business owner is ready for a lifestyle change, the same applies.
“What you need to consider is how to prepare for exit. This means building value in your business so you can sell it on at the best price”
“Whether it is your own business, or you’re advising a client on their business purchase, you also must think along these lines,” concludes Paul. Remember that time is the risk, when selling your business in the future, unless you build value into it now.”
To discover how to build value into your business, please call Uscita Solutions on 01606 535 020 or visit uscita.co.uk.
Alternatively, Uscita Solutions have developed a guide, “8 Key Ways to Add Value to Your Business“, which you can download for free, here.
