An Open Letter To Successful Business Owners
This article appeared in the February 2017 edition of Forbes magazine. Click here to view the original article.
Author: Josh Sherrard
One of my clients, a strong, healthy individual, built his business with his own two hands and has a deep sense of ownership and stability. But a few weeks ago, he went in for a minor angioplasty procedure. While he was under, a lung collapsed and the doctors ended up doing a triple bypass. His stability and control were dramatically shaken and he now faces the recovery. More importantly, he needs to strategize for the success of his business and family without him.
Sometimes there is a bend in the road we don’t see coming, and although we are confident and secure, this ever-changing world can threaten our continued success.
“The biggest risk is not taking any risk… In a world that’s changing really quickly, the only strategy that is guaranteed to fail is not taking risks,” Mark Zuckerberg said a few years ago. Demographics, popular culture, the environment, economics, markets – they’re all changing at what seems to be an accelerating pace. Technology is a big driver of this change with the emergence of artificial intelligence, advanced software, machine learning, robotics and sensors. Most other fields are being affected by technology: medicine, the automobile industry, agriculture, law, etc. And what’s going to happen politically with Brexit, Russia, the Middle East and President Trump?
In the face of all of this change, all of this disruption, can you as a business owner reliably predict the future of your business beyond a few years? Can you confidently say that “business as usual” will remain so indefinitely? For most business owners today, I believe it would be delusional, naïve and even dangerous to believe that the way business is conducted today will remain the same; rather, the pace of change will only accelerate for the foreseeable future.
So what’s the best insurance for continued success? I believe that the new normal is innovation, adaptation and change. Successful business owners, wealth creators and entrepreneurs must continue to make bets on what the future might hold. They must be willing to take calculated risks and they must be willing to absorb losses and deal with the inevitable setbacks that come with risk taking. Therefore, I believe that having an outside portfolio of assets allows a business owner, wealth creator or entrepreneur to continue to take these necessary risks and to keep growing their business success by creating new value.
What if you’re a successful business owner with a great lifestyle but you haven’t built up any substantial wealth outside of your business? If most of your net worth is tied up in the business, consider a liquidity event of some sort. It could take the form of advanced tax strategies that build up outside assets over a relatively short period of time. It might involve a transaction that sells part of the business to family members, long-time employees, friendly third parties or even the public. It might involve a combination of techniques and strategies that build up and protect outside assets.
My point is not to endorse any one strategy, transaction, or technique – planning is by its very nature, customized to each individual and somewhat unique to that individual, family or business – but rather to draw attention to the accelerating changes in the world we live in and to suggest that businesses now, more than ever, must continue to innovate and take the risks that go along with innovation. To do so is a business owner’s best insurance for continued success. And in order to confidently and aggressively pursue innovation, a business owner is well served to have a well-conceived portfolio of outside assets, structured to provide a buffer in the event that setbacks and failures occur.