How to Increase Your Business Value to Create Personal Wealth

Most business owners will agree: scaling a profitable business is not easy.

It takes a strong vision, sufficient capital, the right leadership and great talent to build a valuable business asset. Even if you never decide to sell, creating a profitable business asset is an incredible way to build wealth. However, many business owners lack the right playbooks and resources to unlock the wealth trapped in their business.

This article includes strategies business owners can use throughout the different stages of growth to increase business value. First, let’s take a look at the four stages of growth.

Four Stages of Growth: Forming, Storming, Norming, Performing

As a business grows, it moves through four stages: forming, storming, norming, and performing.

These stages, coined by Bruce Tuckman in 1965, are a good representation of the different phases a business goes through during its lifecycle, but it’s important to note that not all companies move through these stages linearly. You may start at forming and move into storming, or you may backtrack through earlier stages as you grow.

Here’s a snapshot of the four different phases in Tuckman’s process:

• Forming: This is the scrappy startup phase where all activity is fresh and new. You are most focused on keeping the business alive from day to day. As a business owner, you are integral to the day-to-day during this formative stage.
• Storming: Your efforts are well on their way to growth, but people around you need clarity and explicit guidance surrounding their activities, goals, and how to collaborate cross functionally. During this stage, you’ll end up taking a lot of risks– some will pay off, others might not. You’re also focused on strategically hiring key talent whose strengths compensate for your gaps in skills or expertise. This is key to getting you to the Norming phase.
• Norming: At this stage, the team has clarified its overarching purpose. There is a norm when it comes to your business operations, and people are better able to resolve problems on their own. You’re focused on people, processes, and systems that will help you scale and increase business value.
• Performing: Once you’ve reached the Performing stage, your team is working together easily and coordinating among themselves to keep the business running efficiently. There’s still risk and challenge associated with this stage, but you’re also setting–and reaching–new expectations for yourself and your team. Once your team is performing, the business should be well-equipped to run as a valuable asset without your day-to-day involvement.

No matter which stage you’re currently in, it’s never too late to start identifying and implementing strategies to grow your company’s value and in turn your personal wealth.

Develop a Clear, Strong Vision

Establishing vision, mission, and values statements creates a strong foundation to build upon and keeps your team aligned and focused on shared goals. While these statements are closely related, they serve slightly different purposes. The vision of a company is an overarching statement (a sentence or two) that helps employees, stakeholders, and investors stay aligned on the company’s future direction. It answers these questions: Why are we in this business? What do we stand for? What will be our impact on the world?

As your business expands, distributing responsibilities is essential for increasing business value. In order to hand-off these tasks successfully, you must establish a clear vision that your partners and employees will buy-in to. Along with strong leadership and consistent visibility, your vision helps the team understand how to drive their work forward toward future goals.  As the business owner, it’s your job to constantly communicate this vision to your growing team. People want to know how their contribution is going to help the company win.

Every team member’s role should be defined within the context of the larger vision. For example, if you hire an Operations Manager, micromanaging their tasks will not give you (or them, or the business) the opportunity to grow and evolve. By ensuring they understand and align with your business vision and goals, you can empower them to make decisions on their own, thus freeing up your time and energy to focus elsewhere.

Forming a strong vision takes time and likely several iterations. Even once you think you’ve landed on a vision, it may change. This is especially common as you move into the Storming stage, where you’ll encounter new perspectives and challenges that may take you in a new direction. Remember to communicate changes clearly and often to ensure alignment through all stages of growth.

Transition Your Role From Day-to-Day → Strategy

As a founder, your most impactful contribution lies in strategic thinking and growth-oriented tasks–something you can’t efficiently handle if your time is tied up in completing tasks. Wearing a multitude of hats is necessary during the Forming stage, but doing everything on your own isn’t scalable. So how, exactly, do you transition to leading the company instead of getting mired in minutiae?

In addition to establishing a clear vision for your company, you’ll need a clear vision for your own future. Take time to think through your role five and ten years from now. Map out the tasks you will and will not be responsible for. Most likely, you will find that it’s nothing like your current workload. This is the next stage of growth: making a plan to get there.

Delegate your current responsibilities to employees who align with your goals, or find ways to automate these tasks. As your company grows, you may even find that there are some responsibilities your business no longer needs.

Yielding final decision-making rights to someone else can be challenging, but it’s crucial as your business moves into the Norming and, eventually, Performing stages of growth. Bringing in more decision makers not only clears your own plate to make room for bigger picture responsibilities, but also allows for more diversity of thought in your daily operations.

You may even find that this makes running the business more enjoyable. You can hand off tasks you don’t enjoy and focus on the areas where your leadership skills and interests really excel.

This is important for your employees’ growth too, as they will learn critical skills that help them develop and perform in their own roles. Partners in the company who will one day acquire the business from you will need to learn every aspect of the business and feel the weight of making critical business decisions on their own. Giving them experience now while you are here to guide them helps secure the business’s future success. By extension, this increases the business’s value, since its success is no longer entirely dependent on your presence.

Run Your Business With an Exit in Mind

Even if you never intend to sell, exit planning is a great way to increase your business value and create personal wealth. In our recent 3-part Exit Planning podcast series, Senior Exit and Business Advisor, Greg Maddox explains that exit planning is really the same as great business strategy.

“Most people are not preparing their business or themselves for an exit. There are three common challenges they face on some level. First, they really own a job, not a business. If they were ever to leave for an extended period of time, that business is unlikely to grow and thrive at the same level without them. Second, they have all their financial eggs tied up in that business basket, so the vast majority of their net worth is usually locked inside of the proverbial walls of their business. And third, in pursuit of trying to solve the first two, they tend to over-sacrifice on the personal, family, and health front. Solving those three things is what exit planning is all about. It’s really just great business strategy.”

With your company’s vision guiding the way, you’ll need to establish an operational business strategy that serves as infrastructure as your company scales. This means technology, systems, and processes that increase the value of your business by enabling your team work efficiently and effectively without your direct involvement.

Ask yourself what you can do to systemize various areas of your business. Instead of making knee-jerk decisions, documentation and standardized execution strategies allows your employees to excel in their roles.

Evaluate each area of the business and look for opportunities to scale:

Finance

• Are you using data to make decisions?
• Is your accounting team helping you translate information into reports that make sense?
• Are you creating forecasts?
• Do you have a target?
• Have you created a plan of attack to reach your target?

Sales & Marketing

• What’s your average deal size?
• Do you know what your sales funnel looks like?
• Do you know your conversion metrics?
• What is your plan to acquire leads? Which channels will you use?
• What’s your budget?
• How do you track effectiveness or ROI to make decisions that eliminate the losing propositions and double down on what’s working?

Leadership & Recruiting

• What’s the rhythm of meetings and communications?
• How are you building culture while also holding attention to accountability? How do you find that balance?
• Do you have KPIs and metrics tied to each role? Have you figured out a way to take some portion of their compensation and attach it to KPIs so everyone is motivated?
• If you keep meeting these goals, at what point will my team be overworked? How are you going to solve that?
• Do you know how to convince top talent to work for me, especially as a small business?
• Do you need full-time positions for every role? Where can you offload small or inconsistent tasks to contractors?

Through it all, tech enablement can help by limiting human error and improving efficiency. The right technology investments save time and money, in addition to improving team morale. No one enjoys menial, manual, or frustrating tasks that could be automated by software or tools instead.

Equally important is to establish a workforce that best delivers on the business strategy you’re trying to achieve. Just as your own role as business owner will transition over time, so might the people already on your team. Regularly take time to reevaluate which skills your business needs in order to scale – and of those, which will need a full-time position and which can be handled by an outside contractor.

For example, say your Operations Manager has become more involved in strategy over time. Which duties of theirs can be delegated to a contractor? The Operations Manager already knows your business and has bought into your mission and vision, and transitioning their responsibilities helps them continue growing in their career.

In this way, you can optimize your current workforce to acquire the skills you need. At the onset, this may feel like a heavy investment into professional development and upskilling, but it helps you maintain your company culture while also learning to work in an agile fashion. You’ll keep the best of what you started with while also evolving skills that keep you moving toward your vision.

All of this serves to drastically enhance the value of your business. While you may not be thinking about a business exit at the moment, solid business strategy puts you in the best position for when that day inevitably arrives. It also frees you up to prioritize your personal wealth plan and experience the kind of profitability that allows you build wealth outside the walls of your business.

Surround Yourself with These 4 Key Advisors

Outside advisors are essential for getting clarity and strategic support. This external perspective is crucial, not just in the early days of your business but well into the other stages of growth. When appropriately leveraged, these four key advisors can help you scale and increase your business value and personal wealth.

Leadership Coach

As a business owner, you may not have anyone holding you accountable. If you feel too comfortable in your role, it’s likely time to hire a leadership coach. If you’re comfortable, you may not be pushing yourself to the next level–which can lead to stagnation. A leadership coach can be the partner you need to help you break out of the Norming and into the Performing stage.

Business Advisor

During the early Forming stages of your business, you may have had to scrape for dollars and focus on bringing in revenue. But as your business grows, your focus should shift from “increasing revenue” to “increasing value,” which is where a business advisor comes into play.

Business advisors help with big picture business strategy, providing strategic direction aimed at increasing your business’s overall value. This often includes building out processes and systemizing various aspects of your business, such as establishing documentation, business continuity planning, leveraging new technologies, building out sales funnels, and more.

With cohesive, comprehensive systems in place, your team can work more efficiently and in tandem. This is crucial for setting a solid foundation during the Norming stage so your team has the support and structure to expand into Performing.

Tax Attorney

For small businesses, tax and legal often go hand-in-hand. And while general CPAs are skilled in compliance and accounting, they tend to lack the legal experience that a business owner needs.

To get the most out of your business, look for someone with the skills to do forward-looking tax and legal planning. A tax attorney can bring experience with both to the table, offering valuable insight into legal topics like multi-entity-based planning, company structure, and more, and then tie in how these various factors will impact your business and personal tax planning opportunities.

Wealth Manager

Your business is likely the most valuable asset you own. It’s also a complex asset with many moving parts, and just one piece of your larger financial puzzle.

A wealth manager is essential for creating a long-term plan built around achieving your goals. By looking at your overall financial picture, they can find opportunities to help you grow wealth separate from the business, plan for taxes, save for retirement, and overall translate business income into a means to achieve the life you want to live–both now and after your eventual exit.

It’s also important to distinguish between a wealth manager and a financial advisor. A financial advisor may not have the right experience to guide your exit planning process and manage the kind of wealth and assets you’ll acquire post business sale.

For business owners, selecting a wealth advisor before you sell is crucial. Business ownership gives entrepreneurs access to advanced wealth and tax planning strategies, such as qualified small business stock or the ability to stack retirement plans as a top-line deduction. In order to identify which strategies make sense for you and your business, you need a wealth manager who can look holistically at the big picture. They will coordinate with your other key advisors and ensure everyone is working in tandem toward achieving your goals.

Business growth and exit planning is a team sport. You’ll want to engage these key advisors early in your company’s lifecycle to maximize your business value and your wealth potential –with your wealth advisor as the quarterback.

Creating Personal Wealth Alongside Growing A Business

Your business can grow to be one of the most valuable assets in your life, but it requires holistic wealth planning to ensure you’re protecting the asset you’ve poured your heart and soul into building.

Every business owner faces an exit at some point, and ideally, it’s on their own terms and timeline. But we know that life doesn’t always play out according to plan. That’s why it’s important to engage a wealth advisor early-on to work alongside your other key advisors as you grow your business. A knowledgeable wealth advisor can help you protect your business assets, provide you with the right playbooks to unlock the wealth trapped in your business, and ultimately help you achieve more freedom over your time and options.

At Monument Wealth Management, we start by creating a Private Wealth Design that helps you get clear on your specific life and legacy goals and what your wealth picture needs to look like to achieve them. We specialize in helping busy business owners and executives gain this clarity and then collaborate with their team of advisors to achieve the plan–with time to spare. See if we are a fit for you in just 30 seconds.