We have all been there. Rearranging the deck chairs on the Titanic. There was always an unspoken vision – never written but certainly desired. But things got in the way. The problem was that so many issues came up. There was never a quiet period when things could be thought out. There was never enough time to do it right. Then there was no time at all, and what we were doing was too little too late.

How many business owners have you been aware of who have never derived full value out of their business? Some owners could not realize their business dreams because of a health issue or burning out. Some owners were forced out by other owners. Most owners fail to realize maximum value from their business simply because no one would buy their business for full value. These owners did not receive full or maximum value from their business because they did not plan, and then all of a sudden, what they were doing was too little too late.

Having an owner agreement with buy-sell provisions protects the value of the interests of owners who cannot be involved in the full cycle of the business. Planning for the sale of a business for maximum value is the way to obtain maximum value for a business interest. But most businesses do not have written plans. Why? Business owners will tell you it is because they never had time to plan, but that is not the reason.

You will not have time to plan if you continually do those tasks which are urgent but not important over those tasks that are important but not urgent. The business owner should prioritize time for creating a written strategy, implementing a plan from that strategy, and revising the plan as it is executed. Not doing that by prioritizing urgent but not important tasks that could be delegated is a form of procrastination – a fear of the difficult tasks involved in the important activity of planning.

For a multiple-owner business, the values of the owners should be articulated one to the others and a strategy, like the Prior Diligence strategy, developed from those conversations. This is not easy, and it requires quality time for the owners to communicate. From this strategy, a plan of action through Dynamic Planning should be developed through group decision-making involving all elements of the business. This is also difficult, but it can be accomplished, and it becomes easier as a group decision-making policy becomes embedded in the business. Don't let the time thief steal your chance to get full value from your business. Learn how at the Owning a Business substack (https://rickriebesell.substack.com/welcome).

I like to walk my dog, but the other day when the time came, I decided not to. The disappointing reason was that when I looked outside, I could see lightning and hear thunder. At the same time, I saw my neighbor outside walking his dog and looking very unconcerned. I later learned that during the storm lightning caused a fire in a house near ours. I did not regret my decision not to go outside, but I do not think my neighbor regretted his (he was unscathed by lightning, and his dog was able to go on schedule).

We all have levels of awareness when we are more aware of foreseeable, adverse consequences and decide to take, or avoid taking, certain actions to reduce risk. My neighbor's risk level was higher than mine, and his actions were different from mine. Had we both watched lightning strike ground between our houses, our actions might have been the same.

Business owners perceive the foreseeable, adverse risks of small business in different ways. Some owners, even though they are indispensable to the success of the business, choose to do nothing about the foreseeable, adverse risk that something may happen to cause them to leave the business with a negative result to the business. Death and disability are the most common risks but there are many others including changes in personal interests, family issues, and aging. Many owners are comfortable ignoring this risk, but most should not be.

There are ways to reduce the risk of the foreseeable eventual withdrawal of an owner indispensable to the business.

There should be employees, not owners doing the indispensable management and operational tasks that the owner is doing. Ideally an owner should not have management or operational tasks to perform in the business and should not be indispensable to the business. Not only does having an owner doing tasks indispensable to the business put the business future in jeopardy, but it also makes the business less valuable. A sophisticated buyer of the business will not pay the maximum value for the business if the continued success of the business requires the selling owner to stay involved.

There should be a written plan describing the decision-making process, strategy, entity selection, governance, owner buy-sell provisions, and succession provisions. The creation of this plan by using a decision-making process that becomes embedded in the culture of the business involves documenting a strategy that recognizes the values of the owners as they relate to the business, describing the goals that emanate from those values, and identifying actions to be taken to reach those goals.

The implementation of such a plan is described in detail in the Owning a Business Substack at rickriebesell.substack.com. The strategy of obtaining maximum value from owning a business is Prior Diligence. The planning is implemented through Dynamic Planning.

One in four private sector U.S. businesses fail within their first year of operation. After five years, almost half (48%) have failed. After ten years, the failure rate is 65.3%. (According to data from the U.S. Bureau of Labor Statistics.)

Generally, businesses fail when they run out of cash. Cash flow is a metric indicating how money is coming in and being spent in a business. Marketing decisions influence how much cash comes into the business. Operations and growth decisions control how the money is spent. Good decisions made about cash flow will prevent business failure.

Small to medium sized businesses are often founded by someone with a good idea or skills that the marketplace demands at a point in time. Over time one person rarely possesses the knowledge and time to make all decisions concerning marketing, operations, growth, and changing business conditions. To make good decisions and prevent failure, there must be an owners' strategy setting goals and actions taken by all elements of the business to accomplish those goals. Where the strategy changes or business conditions change, decisions affecting cash flow must be made by using the resources of the entire group constituting the business. The procedure of making decisions should be a group decision making process.

When decisions are written down, they constitute a plan. A business plan documents decisions about cash flow and establishes an operating budget for the business. As marketing, operations, and ownership changes, decisions made by the group decision-making process should be documented to all elements of the business as a part of or a revision of the business plan. This makes the planning dynamic.

Most small to medium sized businesses do not have a written business plan. This is the primary reason for the high failure rate. Business owners have a difficult time instituting a group decision-making process. Many owners plan by looking in the mirror and making decisions without the knowledge available in all elements of the business. Owners make strategy decisions and do not document those decisions. Where there is no business plan, goals are not articulated, and operating decisions are made without understanding the owner's strategy.

Given the failure rate, it helps to focus on success. What is success for business owners? Most owners would be very happy to sell the business for maximum value in three years.

The Prior Diligence strategy and Dynamic Planning process provide owners with a methodology of accomplishing a sale of the business for maximum value in three years. Implementing a Prior Diligence strategy and accomplishing Dynamic Planning involves installing a working decision-making process in the business, documenting the owners' strategy, establishing goals, and articulating the actions to be taken to reach those goals. All of this is described in detail in the Owning a Business substack at rickriebesell.substack.com.

The best way to avoid business failure is to adopt the Prior Diligence strategy and implement Dynamic Planning with the goal of selling the business for maximum value in three years.

As the owner of a small to medium size business, you may have felt the need to ask for help but not felt comfortable doing so. Owners of businesses are often skilled in the business they own and enjoy the respect of their family and friends. If their businesses are successful (profitable), it is usually based on their leadership and good fortune. But things change and sometimes the successful are faced with difficulties and even poor results. The humility it takes for an owner to recognize that business is a team effort and that the policy-making group of a business needs help is a principal factor in business success. What is the best way to seek help?

You probably expect me to recommend a consulting intervention. When I am consulted, the first advice I often give is to find a new way to perceive the business through all levels of the business. New perceptions come from the observations made from the experience of the employees of the business. Yet these perceptions are often not passed along to the owners or the policy-making group of the business. This is the first place to find help.

Yes, a successful business is a team effort, but the chemistry of each team is different. Within a successful business are many individuals who have contributed to that success and have observations about the business that are unique and therefore helpful to forming new perspectives. In many businesses those who are not members of the policy-making group or in executive management are not consulted about their opinions concerning the operation of the business. It is often difficult for an owner to determine if this is the case in a business. Candor is often not an encouraged trait in a business. Yet there is knowledge and wisdom in the experience and opinions of those who operate the business.

There is a reason for a chain of command, and in most businesses that hierarchy should be preserved. Yet if there is knowledge or opinion that is valuable and available only by direct contact with an employee, how should that contact be handled? There are different ways to accomplish this contact.

Perhaps the most commonly used and most dangerous is that of the respected intermediary. This is a person within the business who is trusted by most elements of the business and receives candid communication from these elements. This information is given to the policy-making group by the intermediary. The danger comes from two sources: the integrity of the intermediary individual and the difficulty of maintaining the trustworthy status of the intermediary. Does the intermediary have an agenda? How confidential can the communication remain? Once the intermediary is compromised, the resulting distrust, both for the intermediary and the policy-making group can be toxic.

The better solution, that used in Dynamic Planning, is to recruit observations on the format that also contains the operation plan, monitoring metrics, revisions, and other relevant communication. Dynamic Planning, explained in detail in the Substack, Owning A Business, http://rickriebesell.substack.com, utilizes a format that allows all elements of a business to see the plan narrative, the monitoring metrics, revisions made, and comments of all using the format. The use of this format is an exercise in leadership humility, communicating the plan, the results of the actions to realize the goals of the plan, the revisions made, and the comments of those using the format.

Among the common goals of members of a capitalistic economy is the creation of wealth. This is often a reason why people own businesses. For an individual, the concept of wealth creation is the escape from dependence on earning funds for current expenses to live a certain lifestyle to building up assets and resources that appreciate over time and are of a magnitude to sustain that lifestyle or a better lifestyle without the need to earn funds for current expenses. Creation of wealth is a reference to accomplishing financial independence through the creation of passive income from investments.

There is also the concept of risk involved with the creation of wealth. To be independent from the need to earn income it is ideal not be at risk for the source of that income. Risk cannot be eliminated, and the safety of certain types of passive investments can be debated; however, there is no question that an income source from a business has more risk than an income source from most passive investments. Business risk is significantly more because even over short periods of time the business arena is constantly changing, with markets evolving, management transitioning over time, and other unforeseen changes. A business which is not changing or that is making poor decisions will become unprofitable. This business risk, although variable for each business, will usually be far greater than the risk of carefully making passive investments.

For a business owner, the path to wealth creation is to transfer the value created by the profitable operation of the business from the business to the owner taking that value out of business risk. This enables the creation of wealth through the acquisition of safer passive investments that sustain a desirable lifestyle.

How does the business owner accomplish the transfer of the maximum value possible out of business risk and into personal investments at lower risk? A sale to a buyer outside the business will accomplish the maximum value transfer of value from out of the business to the business owner. The strategy to accomplish a deriving maximum value from a business through a sale to a buyer outside the business is Prior Diligence.

Prior Diligence is the basic strategy for planning to sell the business to a sophisticated buyer who will investigate the business as part of a due diligence process prior to sale. Prior Diligence places the business owner in the view of the prospective buyer and asks, "would I buy this business – if not, why not?" The business owner reviews a diligence checklist and addresses deficiencies of the business accomplishing improvements through Dynamic Planning.

The details of the Prior Diligence strategy and the Dynamic Planning method are described in the substack, Owning A Business, https://rickriebesell.substack.com. By utilizing this strategy and method the business owner can accomplish deriving maximum value from a business and transfer that value to the personal investments of the owner enabling the creation of wealth.