Leveraging Your Liquidity Event

The last goal an owner has for any business is to take it to a liquidity event or hand it down to their kids. A liquidity event is when a business owner sells their business and captures the market value of that business at that point in time.  It is much like when you sell a house and now have the cash to go invest in another asset.

But that raises a conundrum that most people don’t expect, often times business owners are really bad at retiring!

Most employees have a job because it pays the bills, but they don’t always find pleasure in being an employee. They are working for retirement when they will hopefully be in good enough health to be able to enjoy the fruits of their labors.

Business owners chose their path, they often have something that drives them to control their destiny. Once they prove that they can be a successful business operator they may sell their business.

The challenge comes in after they spend some time around the house, playing golf, travelling, etc.  They often find they have trouble replacing the fulfillment from hobbies that they found from running their business.

But, how do you build that next step so that you can both have the business interaction and a lifestyle that you can enjoy?

It all starts by looking at what is important to you and how you can leverage your skills, resources and capital.

At any given time about 60% of the projects I am working on are with business owners that have had some sort of liquidity event and who are looking to reinvest a portion of that cash pool into a growth opportunity.

When a liquidity event happens, most people start working on their investment strategies.  Some of that pool will probably be reserved in cash, often funds are set aside for a retirement they may never take, a portion may go to a new home or toys, but then we get to what they may reassign to a new endeavor.

This is when we need to balance capital with skills, resources and lifestyle.

These franchise candidates are very savvy but have spent many years focused, often, on one brand and in one space.  What I get to provide them is a radar screen that covers all of franchising.

From there we can look at where growth opportunities exist, where they can add recession resistance and what brands have a system set up with an owners role that fits how this owner wants to work while building lifestyle.

So, where to start?

I find that owners that used to have empires built around commercial retail space split roughly evenly on whether they want to continue with that kind of real estate equation or to move to a service model that they can grow less expensively and faster.  This boils down to the goals of the owner as we can create a game plan and find solid brands for either. Typically these candidates are much less focused on how a brand might look to their friends or neighbors than having a very predictable model that they can hit home runs with.

Service brands offer some of the most interesting franchise options today.  They are often in markets that are far more fragmented and inefficient than restaurant and retail spaces that have been well developed by franchise brands for decades. It is in these more fragmented and inefficient markets that we find some of the best growth opportunities for capable owners.

Once we have identified a market or markets, we start looking at business trends and the owners desired role. For these candidates the split tends to be about 20% want to run the business full time, 20% want a business where they can be in a flexible executive type of role (involved but able to step away) and 60% want a business capable of a semi-absentee role.

Lifestyle becomes a greater factor as owners age. Semi-absentee and executive roles offer more flexibility for family, travel, etc. For some, it also offers more bandwidth for additional businesses in their portfolio.

The key is having the right game plan to make both your role and your business successful. Often this means that quantity and quality of staffing will be a key component. We may spend a little more initially to get the right talent foundation in place.

Sometimes in working on this plan we advance a candidate from a front line franchise role to a Master franchise type of role where they are now coach and mentor to those front line franchisees.  It is a role that sits between franchisee and franchisor.  While not common, it is quite coveted and sought out in the industry.

We see great strategies rolled out after liquidity events every month.

What is your success story? Let’s go find it!

George Knauf is a highly sought after, trusted advisor to many of the top franchise ownership groups in the world. With over 25 years of experience in both start-up and mature business franchise operations he is uniquely qualified to advise individuals that have dreamed of Building their own empires. Whether you have an existing portfolio or searching for your first franchise, he can help you to pursue your dreams. Contact the Franchising USA Expert, George’s Hotline: 703-424-2980.


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