How to Lose $10 Million Without Even Trying

hand burning paper dollar bills

Last week I sat down with the owner of a profitable, multi-million dollar information services business and discussed his 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 has had flat revenue growth. A combination of competitive pricing pressures and customer churn has created a frustrating one step forward, one step back dynamic, in which there has been no real business progress.

And this late 50s-aged businessman 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.

What I felt from him as he spoke was a lack of stamina – an inability to conjure up and make happen new business ideas no matter how potentially transformative and profitable they might be.

So what should he do?

He could just “keep on keeping on”  – make decent money without taking too many obvious headaches or risks.

The problem with this approach is that pesky little word “obvious.”  Because lurking right beneath the surface are a host of business threats ready to raise their dangerous heads at any moment.

The first of these 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 disappearing profits.

A second is philosophical.

A do nothing, “Waiting for Godot” approach just feels wrong, especially for businesspeople whose ambition and competitiveness is what made them successful in the first place.

And then there is the opportunity cost – there are potentially huge sums of money that moderately successful small businesses can 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. This places the current value of the business only in the low hundreds of thousands of dollars, if anything at all.

However, if through effective innovation and change management, the company is able to re-achieve a growth trajectory, along with a credible plan, with all the key business plan components, to build on that growth in the years-to-come…

…then a sales price of 2-3 time last 12 month’s revenues is potentially attainable.

Which represents the difference between a few hundred thousand dollars of sale 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 manifold, ranging from facing the “look in the mirror” analysis of whether an executive still “has it,” to recognizing the need to clean out organizational “dead wood” – who often times are folks that are family and close friends – to give the business its best chance of success.

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

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

Usually, It comes down to finding the courage and re-discovering the work ethic to just make it happen.

Nobody will scold you if you don’t, but “business as usual” is almost never inspiring nor particularly lucrative.

So why not go for it?

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