Investor or Employee? Changing Your Mindset About Your Role in Your Business
You are a business owner. But when you arrive at the office in the morning, I’m guessing you arrive as an employee. You might be the highest ranking employee, but you’re an employee nonetheless. You have job duties and responsibilities that need to get done in order for the business to function properly. You draw a salary like everyone else. And the fact that you happen to own the company’s stock does not factor into the reality of your daily work life.
This scenario typifies the super-majority of private business owners, as in most cases you were the first employee of the company and it’s been that way ever since. In the case of a generational transfer, you may have come to your title of owner and highest ranking employee differently from a founder, but you too likely arrive to work as an employee first.
If these descriptions resonate for you, I’m guessing that while you know you’re the owner, you rarely, if ever, put on your investor hat.
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By failing to view your business through the investor paradigm, you are likely losing the forest in the trees, focusing on daily emergencies instead of emphasizing the items that will increase the value of your stock.
Investor or Employee?
Here’s a few questions to see if you think of yourself as an investor:
How often do you consider yourself a stockholder in your business?
Do you have a good idea of what your business is worth?
Do you know if your business is worth more today than it was at the same time last year?
When you make business decisions, do you think about whether or not a certain decision will increase the value of your stock?
Do you know what activities will increase the value of your stock?
Here’s a few questions to see if you think of yourself as an employee:
Do you spend most of your time handling operational tasks in your business (quoting jobs, running machines, driving a truck, managing vendors, scheduling projects, handling employee issues, etc.)?
Is a top measurement for success your year-over-year change in bank balance?
When you make business decisions, do you mainly consider the cash flow implications?
The second set of questions isn’t unimportant, it’s just that handling the day-to-day and managing current period cash flow are going to drive exponential increases in the value of your business. To increase the value of your stock requires focusing your time and efforts in a way that aligns with the first set of questions.
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The average company does not successfully sell, it is simply closed or liquidated. We see it as our job to make sure your business is on the right side of this statistic, and shifting your paradigm from the urgent to the strategic is critical to give your exit the best chance for success.
Thinking Like an Investor Drives Better Decisions
Over the course of your career, whether through salary or profit distributions, you’ve done well as your own employee. We do not discount this point. Your business has provided you a job and your family a comfortable life.
That said, if you can position your company in a way that excites investors you could be looking at receiving many multiples of your best year’s compensation when you sell. This is what can secure your retirement, the financial stability of your family, and fund the charitable initiatives you’re passionate about. By learning to think like an investor, you will see your thought processes evolve to consider factors beyond the immediate cash flow implications of different scenarios. You may also start to change some of your day-to-day activities to better align with your dual role of employee & investor so that you can dedicate more of your time to your investor role and make a bigger impact.
At Doescher Group, we help our clients think like stockholders. A great first step for business owners is to consider our Exit Audit, which provides a detailed baseline assessment of the value of your company and what can be done about it through an investor’s eyes. If you’d like to learn more, reach out today.
