Business Finance

Financial Endgames For Business

In the game of chess, the endgame is to get the opponent into a checkmate position. When speaking about the game of business I hear a lot of people say “chess, not checkers”, but what does that actually mean?

In the game of chess, the endgame is to get the opponent into a checkmate position. When speaking about business I hear a lot of people say “chess, not checkers”

Do you know what the end game of a business looks like?

Business In General Has One Of Three Endgames

  • Selling The Entire Business
  • Selling a Piece of the Business
  • Holding on to The Business

When you're starting a business you should start with the end in mind. From there you can reverse engineer the building process.

Too many business owners start their business without keeping the end in mind.

Yes, a business CAN make you money. But have you thought about how much money you want it to make you? And have you thought about how you want to make money?

Setting Up A Business To Sell It

Do you know what separates big businesses from small businesses?

The answer is simple.

Scale.

Do you know what gives a business the ability to scale smoothly?

Systems.

If you plan on setting up a business to sell, you want to focus on the systems as soon as possible. Document and systematize EVERYTHING.

A basic business system is a way of organizing tasks that makes them easier to repeat.

Think about the age old example of Henry Ford. He got rich because he created a scalable business system: the assembly line. Each person along the assembly line is responsible for adding a part to a car. By the time the vehicle gets to the end of the assembly line, it is completed and ready to sell. What's exciting is that once the system is up and running, it’s much easier to replicate.

Once the business can operate without you is when you can "complete" the sale of your business. There are owners that decide to sell their business without documenting it’s systems only to find out that the documentation process needs to be completed before they are sold.

In my humble opinion.

One sale is a deal.

Recurring sales is a business.

I'm not telling you to become a business broker...but if you want to eventually sell your business you NEED to understand how selling it works, because only then will you understand the drivers of value in your business. This is valuable information even if you plan on holding on to your business.  

Building And Keeping A Business

This is my favorite endgame in business.

Maybe because I fall in love with the things and people I build, who knows.

But a part of it is definitely because it gives you the most options to make money...lets talk about a few:

Ways You Can Make (More) Money From A Business You Own:

Turn it into a CASH MACHINE by increasing margins, reducing taxes, streamlining systems, etc

Increasing margins happens in one of three ways. Increasing Revenue and reducing the cost of sales will increase your gross margin. Increasing your gross margin and decreasing the operating expenses will increase your net profit margin. Increasing your net profit margin while decreasing your tax liability will increase your after tax profits.

Systems are the tools you use to achieve each of the margin increases above. If executed correctly then you will be able to create a profitable cash machine.

Build steady revenue to access Long Term Lines of CREDIT to INVEST

Sometimes your business doesn’t need to be built to create large profits directly. Sometimes your business can be used purely as leverage to access loans because it has revenue. You can then take the loan proceeds and invest them into more profitable ventures.

  • DO BOTH
  • OR you can buy & sell pieces of your business…

This is where things get interesting because there are SO MANY ways to buy & sell pieces of your business…Ex:

  • Buy/Sell Stocks for Corps
  • Purchase/Sales of Membership Interests for LLCs
  • Buying In and Out of a Partnership
  • Assignment of Contract (aka wholesaling) and more…

Summary

To sum up, buying or owning a business is a game. The ultimate purpose of that game is to build and create wealth. The wealth that you create is going to happen as a result of making strategic financial decisions over and over again.

We call this process building YourBigBank.

If you want to learn more about how it works.

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