What to Do When You’re At a Business Crossroads

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Last week I sat down with the owner of a multi-million dollar, profitable information services company and discussed his business growth and exit plan.

For him, it was the “best of times” in many ways. He was living the American dream. He owned his own business and had an affluent and enviable lifestyle.

But it was also his “worst of times,” with storm clouds gathering that threatened to wash away everything he had worked so hard to build.

For the past 5 years, his business had had flat revenue growth, with a combination of competitive pricing pressures and customer churn creating a frustratingly one step forward, one step back dynamic of no real business progress.

And this late 50s-aged entrepreneur admitted to me that he was suffering from what he described as “creative exhaustion” - finding it near impossible to get excited about new ideas and approaches to grow his business.

And while he didn’t say it, I felt from him an even more perilous exhaustion - a lacking of stamina to implement and “stick with” any of those ideas or approaches no matter how potentially transformative they might be.

Now, there are no “right” answers as to what at this juncture he should do.

Heck, his best choice could be to just “keep on keeping on” - getting older every year for sure, but also making good money without too many obvious headaches or risks as well.

Unfortunately there is that pesky little word “obvious.” Because lurking right beneath the surface are host of business problems ready to pop their ugly heads.

The first of these problems is the natural “entropy” of modern business - i.e. without a significant exertion of ongoing and proper effort, a company’s almost certain future is slowly declining revenues and far more pressingly rapidly deteriorating margins and profits.

The second problem is philosophical, but vexing nonetheless. A do nothing “Waiting for Godot” approach just feels wrong, and does so especially for entrepreneurs whose ambition, competitiveness and unwillingness to accept mediocrity is what makes them first successful in the first place.

And then there is opportunity cost - the huge sums of money that moderately successful small businesses like this one leave on the table by not breaking through and getting to that next level of growth and success.

In the case of this $4 million+ business, because of its flat revenue and profit growth, the high end of its expected value is probably 3-5 times last twelve month’s earnings, valuing the business now in the hundreds of thousands of dollars.

However, as effective innovation is able to drive the business to double digit percentage revenue growth - along with a credible business plan to build on that growth in the years-to-come, a sales price of 2-3 times last 12 month’s revenues is potentially attainable.

Or the difference between a few hundred thousand dollars of exit value and $8-10 million of it.

Now, for sure, "going for it" and trying new and different business things carries risks and causes discomfort. 

Those new things might not work, and almost always require investment of capital and time without any assurance of return.

And, the discomforts are manifest, ranging from facing the “look in the mirror” fears as to whether you still "have it," to the need to clean out organizational "dead wood," oftentimes family and close friends, to give the business the best chance of success.

But almost always, taking these risks and accepting these discomforts are the right business choice.

And most of the entrepreneurs I speak to, feel and know that it is.

It just comes down usually to finding the courage and re-discovering the work ethic to do so.

Nobody will scold you if you don't, but also never will you inspire yourself or others...

And oh yes, there is a LOT of money at stake, too. 

So why not go for it?

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