Business Concern

One in four private sector U.S. businesses fail within their first year of operation. After five years, almost half (48%) have failed. After ten years, the failure rate is 65.3%. (According to data from the U.S. Bureau of Labor Statistics.)

Generally, businesses fail when they run out of cash. Cash flow is a metric indicating how money is coming in and being spent in a business. Marketing decisions influence how much cash comes into the business. Operations and growth decisions control how the money is spent. Good decisions made about cash flow will prevent business failure.

Small to medium sized businesses are often founded by someone with a good idea or skills that the marketplace demands at a point in time. Over time one person rarely possesses the knowledge and time to make all decisions concerning marketing, operations, growth, and changing business conditions. To make good decisions and prevent failure, there must be an owners' strategy setting goals and actions taken by all elements of the business to accomplish those goals. Where the strategy changes or business conditions change, decisions affecting cash flow must be made by using the resources of the entire group constituting the business. The procedure of making decisions should be a group decision making process.

When decisions are written down, they constitute a plan. A business plan documents decisions about cash flow and establishes an operating budget for the business. As marketing, operations, and ownership changes, decisions made by the group decision-making process should be documented to all elements of the business as a part of or a revision of the business plan. This makes the planning dynamic.

Most small to medium sized businesses do not have a written business plan. This is the primary reason for the high failure rate. Business owners have a difficult time instituting a group decision-making process. Many owners plan by looking in the mirror and making decisions without the knowledge available in all elements of the business. Owners make strategy decisions and do not document those decisions. Where there is no business plan, goals are not articulated, and operating decisions are made without understanding the owner's strategy.

Given the failure rate, it helps to focus on success. What is success for business owners? Most owners would be very happy to sell the business for maximum value in three years.

The Prior Diligence strategy and Dynamic Planning process provide owners with a methodology of accomplishing a sale of the business for maximum value in three years. Implementing a Prior Diligence strategy and accomplishing Dynamic Planning involves installing a working decision-making process in the business, documenting the owners' strategy, establishing goals, and articulating the actions to be taken to reach those goals. All of this is described in detail in the Owning a Business substack at rickriebesell.substack.com.

The best way to avoid business failure is to adopt the Prior Diligence strategy and implement Dynamic Planning with the goal of selling the business for maximum value in three years.

Where there is a small or medium sized business with more than one owner, there is an owner agreement. It may not be obvious – in most cases it is not written. But for any multi-owner business the owner agreement must be there for the business to function. To start a business there must be agreement about the business entity to use, the initial capital, the basic governance, and the operational functioning of the business. In various documents regarding these matters there will be writing documenting the decisions made by the owners, but most owners do not document the basic strategy that has led them to business ownership. Most of the time, business owners understand very little about what motivates the other owners of the business, and conversations among owners will not be about strategy but about urgent operational decisions. Owners often make assumptions about the motivations of other owners, and conflicts arise when these assumptions prove false. When the owners must make decisions about important issues involving funding, changing consumer behavior, training and development of management, succession (including buy-sell provisions), technological investment, and regulatory compliance (especially regarding tax issues), the motivations of the owners will have a significant influence on the decisions the owners will make. Think about the businesses you know where conflict among the owners has stymied the success of the business or caused it to go out of existence. It is important for the success of your business to discover and document an owner agreement that anticipates the foreseeable decisions the owners will have to make for business success.

Most businesses do not have a documented owner agreement among the owners because it requires consistent effort to negotiate such an agreement. Often the subject matter is difficult to discuss, and the pressures of operating an owner-managed business make it difficult to find the time needed to accomplish this task. However, the success of businesses where the owners have documented an owner agreement indicates the benefit of taking on the task. There is a detailed description of how to adopt the Prior Diligence strategy and use Dynamic Planning in the Owning a Business substack at https://rickriebesell.substack.com. As with most complex and difficult tasks, it is best to use a segmented approach and address the various issues one at a time.

The issues that owners must discuss and agree upon can be generally described. The motivations of each owner should be addressed in a written strategy for the business. The entity type of the business should be understood in terms of liability and tax consequences for each owner. Any grouping of owners (such as family or seniority) and the concerns of any such group should be described, and appropriate restrictions should be put in place. The governance of the business, including who will make policy and who will be the chief executive, should be set forth. The events (triggers) that will cause one or more owners to transfer interests in the business should be defined. The procedure of the transaction occurring after each type of trigger, including funding and payment, should be provided for in detail. For each transaction, the price of the interest transferred should be defined. If the business will act as a buyer in certain procedures, then the means of the business accumulating the funds for the transaction should be described. The final task is the consolidation of the decisions into one coherent written document.

There should be a meeting of the owners and appropriate stakeholders to discuss each one of these general issues. For each issue there should be a separate meeting. The meetings should be held at regular intervals. The results of the meetings must be documented in writing. Where issues are technical or outside resources would be helpful, they should be utilized. There is a detailed description of how to implement an owner agreement in the Owning a Business substack at https://rickriebesell.substack.com. The documented decisions resulting from these discussions among the owners as consolidated into one coherent document will constitute an owner agreement and the primary planning for the business.

As the owner of a small to medium size business, you may have felt the need to ask for help but not felt comfortable doing so. Owners of businesses are often skilled in the business they own and enjoy the respect of their family and friends. If their businesses are successful (profitable), it is usually based on their leadership and good fortune. But things change and sometimes the successful are faced with difficulties and even poor results. The humility it takes for an owner to recognize that business is a team effort and that the policy-making group of a business needs help is a principal factor in business success. What is the best way to seek help?

You probably expect me to recommend a consulting intervention. When I am consulted, the first advice I often give is to find a new way to perceive the business through all levels of the business. New perceptions come from the observations made from the experience of the employees of the business. Yet these perceptions are often not passed along to the owners or the policy-making group of the business. This is the first place to find help.

Yes, a successful business is a team effort, but the chemistry of each team is different. Within a successful business are many individuals who have contributed to that success and have observations about the business that are unique and therefore helpful to forming new perspectives. In many businesses those who are not members of the policy-making group or in executive management are not consulted about their opinions concerning the operation of the business. It is often difficult for an owner to determine if this is the case in a business. Candor is often not an encouraged trait in a business. Yet there is knowledge and wisdom in the experience and opinions of those who operate the business.

There is a reason for a chain of command, and in most businesses that hierarchy should be preserved. Yet if there is knowledge or opinion that is valuable and available only by direct contact with an employee, how should that contact be handled? There are different ways to accomplish this contact.

Perhaps the most commonly used and most dangerous is that of the respected intermediary. This is a person within the business who is trusted by most elements of the business and receives candid communication from these elements. This information is given to the policy-making group by the intermediary. The danger comes from two sources: the integrity of the intermediary individual and the difficulty of maintaining the trustworthy status of the intermediary. Does the intermediary have an agenda? How confidential can the communication remain? Once the intermediary is compromised, the resulting distrust, both for the intermediary and the policy-making group can be toxic.

The better solution, that used in Dynamic Planning, is to recruit observations on the format that also contains the operation plan, monitoring metrics, revisions, and other relevant communication. Dynamic Planning, explained in detail in the Substack, Owning A Business, http://rickriebesell.substack.com, utilizes a format that allows all elements of a business to see the plan narrative, the monitoring metrics, revisions made, and comments of all using the format. The use of this format is an exercise in leadership humility, communicating the plan, the results of the actions to realize the goals of the plan, the revisions made, and the comments of those using the format.

Among the common goals of members of a capitalistic economy is the creation of wealth. This is often a reason why people own businesses. For an individual, the concept of wealth creation is the escape from dependence on earning funds for current expenses to live a certain lifestyle to building up assets and resources that appreciate over time and are of a magnitude to sustain that lifestyle or a better lifestyle without the need to earn funds for current expenses. Creation of wealth is a reference to accomplishing financial independence through the creation of passive income from investments.

There is also the concept of risk involved with the creation of wealth. To be independent from the need to earn income it is ideal not be at risk for the source of that income. Risk cannot be eliminated, and the safety of certain types of passive investments can be debated; however, there is no question that an income source from a business has more risk than an income source from most passive investments. Business risk is significantly more because even over short periods of time the business arena is constantly changing, with markets evolving, management transitioning over time, and other unforeseen changes. A business which is not changing or that is making poor decisions will become unprofitable. This business risk, although variable for each business, will usually be far greater than the risk of carefully making passive investments.

For a business owner, the path to wealth creation is to transfer the value created by the profitable operation of the business from the business to the owner taking that value out of business risk. This enables the creation of wealth through the acquisition of safer passive investments that sustain a desirable lifestyle.

How does the business owner accomplish the transfer of the maximum value possible out of business risk and into personal investments at lower risk? A sale to a buyer outside the business will accomplish the maximum value transfer of value from out of the business to the business owner. The strategy to accomplish a deriving maximum value from a business through a sale to a buyer outside the business is Prior Diligence.

Prior Diligence is the basic strategy for planning to sell the business to a sophisticated buyer who will investigate the business as part of a due diligence process prior to sale. Prior Diligence places the business owner in the view of the prospective buyer and asks, "would I buy this business – if not, why not?" The business owner reviews a diligence checklist and addresses deficiencies of the business accomplishing improvements through Dynamic Planning.

The details of the Prior Diligence strategy and the Dynamic Planning method are described in the substack, Owning A Business, https://rickriebesell.substack.com. By utilizing this strategy and method the business owner can accomplish deriving maximum value from a business and transfer that value to the personal investments of the owner enabling the creation of wealth.

Traditional planning is static. If there is a written plan, we see the plan formulated, documented in writing, presented at a meeting, and then put on the shelf to be consulted for next year's retreat. This is the opposite of a forceful and changing dynamic plan. A dynamic plan can accomplish continuous improvement in business performance over time resulting in increased profitability. How does a static plan become dynamic?

The answer is in the format of the plan. To be forceful a plan must be understood and implemented at all levels of the business – operational as well as management. The actions to realize plan goals must be monitored and the results known at all levels of the business – especially the policy-making group. A plan is dynamic when the format of the plan narrative provides complete and immediate notice of all of the following: the plan narrative, actions to be taken, results of the monitoring of those actions, and revisions to the plan.

The plan starts with the decisions of the policy-making group about strategy. The action plans are implemented by the executive officers. As the action plans are being executed, those charged with executing the action plans will change the plans to accomplish the task. The plan format should allow changes to the plan to be known at all levels of the business.

The plan experience will be evaluated, frequently by those from the policy-making group. At the highest level, the policy-making level where strategic planning is adopted, the planning does not have to be revised as much as at the operational level where action plans are being executed. It is at the operational level the planning is frequently changed, but often the changes are not documented. These informal changes are often what accomplishes the action plan, but others in the business, especially those in the policy-making group, do not know about these changes. Frequently that is because those who change the plan are not sure they have authority to change the plan but the changes are done extemporaneously to accomplish the task. These changes at the operational level should be documented on the format and encouraged. This is done with the understanding that operational adjustments often are necessary and need to be made expeditiously, but these changes also should be known by management and the policy-making group. The plan format should support the communication of these changes as they are made.

If the members of the policy-making group do not know about changes to the action plan at the operational level, their evaluation of actions taken and implementing revisions and further planning will be flawed. Those taking action should be able and required to amend the action plans. In this way, changes are communicated up and down the hierarchy of management. Moreover, changes are occurring with experience, and revisions to the plan are written coterminously with the decision to change at the operational level. Those charged with execution of action should be empowered and required to change the action planning. When this is in place, the plan becomes an effective form of communication within the business.

Planning is more than creating a plan narrative, it is providing the format for the communication of the decision-making process of the business. The constant questioning of goals, selection of actions, identification of milestones, and determining revisions should be a series of seamless, constant activity. It is this activity that will enable consistent improvement of performance over time. In business, we must establish a process to make good decisions that are documented in planning that is constantly evaluated and revised at all levels. That is the essence of excellent business performance – continuous improvement in performance over time resulting in increased profitability.

In his substack, Owning A Business, Rick Riebesell has described the implementation and execution of a dynamic planning process in a number of posts about Dynamic Planning and the Prior Diligence strategy.

The Concept of Time – How Its Progression Affects Important Tasks

Time is the progression of events from the past to the present into the future. Time marches forward relentlessly. From birth to death, we age, and every moment that passes is unique and unrepeatable. The more important tasks we accomplish within our lifespan, the more fulfilling and impactful our lives can be.

But what defines "important"? Is it happiness? Recognition? Pursuing a passion? How we define, or not define, "important" has a great deal to do with how we spend the time of our life span.

I believe in defining "important" through a written strategy. A written strategy articulates your values and what you deem important. It is a documented set of decisions about your personal vision and purpose. What constitutes a meaningful and satisfying life for you? What are your goals? And, crucially, how do you adapt your strategy as your life evolves?

Every moment spent not working towards something important feels like a loss – not in a negative way, but as a recognition of the limited time we have. We can't avoid all "loss," but we can maximize the time spent on what truly matters.

Without a defined strategy, we default to reacting to urgent tasks. Urgent tasks are tasks we perform when it would be more uncomfortable not to perform the tasks than to perform them. These tasks may or may not be genuinely important. Too often, the urgent displaces the important, leaving us busy but unfulfilled.

There is a way to avoid having urgent and unimportant tasks from taking time away from important tasks.

1. Define Your "Important": Articulate a strategy rooted in your core values. What do you want to achieve? What kind of life do you want to live?

2. Plan and Schedule: Create a plan to achieve your strategic goals. Schedule time for these important tasks.

3. Guard Your Time: Don't let urgent, less important tasks hijack the time you've allocated for your priorities. Learn to say "no" or delegate effectively.

This approach, applied consistently, allows you to maximize the time spent on what truly matters, leading to a more fulfilling life.

This same strategic thinking can be applied to your business. If building wealth through your business is a key goal, I invite you to explore my Substack, Owning a Business (https://rickriebesell.substack.com/). I delve into Prior Diligence, a critical strategy for maximizing the value of your business. The Substack also features a moderated chat, creating a community for business owners to connect, learn, and address the unique challenges of entrepreneurship. A well-lived life can certainly include a successful and valuable business.

Time is finite. Without a clear strategy and plan, opportunities slip away. Don't let that happen. Take control of your time and focus on what truly matters.

In the new year make sure you pay attention to what is important but not urgent. This is the time to make resolutions – that process involving review of the past year and resolving to do something different in the new year. It is a given that urgent but not important matters often replace important but not urgent matters in the time allocation of business owners. This diverts the owners from accomplishing important long-term tasks such as obtaining maximum value for their business interests. To pay attention to what is important you must prioritize paying attention to what is important by scheduling time for that and exercising the discipline to honor the schedule.

During the scheduled time you are paying attention to what is important initially you must deal with the question of what is important? To make sure you continue to pay attention I have four more questions for you to answer in your scheduled time to pay attention to what is important.

The initial and principal question: What is important? This question is answered by creating a written strategy. A strategy is a set of choices derived from personal values that define what is important to you. A value is a normative principle that informs and shapes thoughts, desires, feelings, choices, and behavior. A value is not a preference, but an enduring and essential attribute of character. To bring clarity and order to your personal value system, you should reflect on the circumstances and experiences that have informed and shaped the your hopes, fears, and perspectives. Values define a strategy by helping to answering the question, what is desired? The product of this reflection should be memorialized in writing. In the writing, you must clarify and prioritize personal values which will suggest and frame desires. The writing should be reviewed and amended from time to time to reflect changing circumstances and perspectives. From this writing, you are prepared to articulate your values to other owners and create from that dialogue a business strategy. For a very high percentage of the owners I have known who think about strategies and have been successful, they have adopted Prior Diligence as a strategy template for accomplishing the result of realizing the highest possible value from ownership of a business interest. The components of prior diligence are: separation of the owner from management, the presence of co-owners, the implementation of a buy-sell agreement among the owners, a sale to an unrelated outside buyer, and management of the business with dynamic planning. All of these components are described with more detail in the archives of the Owning A Business substack at rickriebesell.substack.com.

The second question is: what is the essential goal to accomplish in the upcoming year based on your personal and business strategy? The correct long-term strategic planning question is what things do we need to accomplish to get what we want? The long-term goals cannot be achieved in a short period of time. You need to establish intermediate goals that can reasonably accomplished in a year or less. If your long-term goal is to sell your business for the maximum value and your are still an owner-manager, your goal for the year might be to find management replacements for your management activity.

The third question is: what actions must be taken to accomplish the goal? Whether a desired goal can be met is determined by a plan which deals with the resources available to meet the goal. Strategy answers the important desire question. Planning describes the action to be taken to accomplish the goal. If you plan first without knowing what is important, you are simply looking at the resources available and asking, what can we do with these resources? This ignores all issues of whether certain actions are appropriate or even worth consideration. This unfocused effort will not result in excellent business performance.

The fourth question is: how will you measure the progress toward the goal? What are the mileposts that should be reached each month to achieve your goal? To properly monitor the progress toward a goal, there should be points of progression or mileposts that indicate whether appropriate progress is being made. For the goal of finding employees to take over management duties that you as an owner now have, you may set milestones of writing a job description, advertising the position, conducting interviews, hiring, and training management employees to take over your current management activity.

The fifth question: if I miss a milepost, how do I efficiently revise the plan and communicate the changes? When the results are unexpected, the actions taken to meet the goal need to be revised. Delays can occur. We all know from experience that you can't always get what you want. If the strategy is coherent, the goal will be understood, and the effort may produce the best result possible. But the ways of the world will cause things to change, and that will not only force changes in planning but perhaps changes in values and then strategy. The decision-making process is circular, and the communication of monitoring results, changing strategy, and revising plans must be continuous and communicated in a timely manner at all levels of the business. Dynamic Planning, as described and explained in the Owning A Business substack at rickriebesell.substack.com, describes a planning format to communicate effectively to all involved parties the goal and the actions to be taken to meet the goal as well as the results of those actions.

In the upcoming year, to avoid prioritizing urgent but not important matters, answer these questions. What is important? What is the essential goal to accomplish in the upcoming year? What actions must be taken to accomplish the goal? How will I measure the progress toward the goal? How do I efficiently revise and communicate the changes? At the end of the year you will look back on the accomplishment of important tasks.

As a business owner imagine how it would feel at the end of the year to look back and realize you have reached one or more important accomplishments. You used your values to create a strategy. You set a goal at the beginning of the year. You created a plan to act to accomplish the goal. You executed the plan by acting to reach the goal. The feeling would be one of satisfaction and a sense of accomplishment.

For most owners this feeling of satisfaction will not be possible. Most will not have articulated their values and created the strategy to set the goal. Some will not have published the plan so that actions were taken to reach the goal. A few will have set the goal and created a plan but not attained the goal. Those few will be able to ask the question: why did it not work out as planned? Then they will be able to revise the planning to accomplish the goal.

But for those without a plan, and especially for those without a strategy, what happens is that urgent but not important tasks have taken time and effort away from important tasks that lead to significant accomplishments. The failure to articulate values and create a strategy causes a lack of focus on what is important. The function of a strategy narrative is to define what is important. Without a plan based on that strategy to accomplish important goals, the urgent will overtake the important.

Do not let time continue to pass without defining what is important. Do not let another year go by without important accomplishments. Here is what you can do immediately to prevent that.

1. Define what is important in twenty minutes. Take no more than five minutes and a blank sheet of paper and list what is important to you. After five minutes, categorize what you have written. For example, you may have written the following list of what is important: "supporting my family, maintaining my health, contributing to the community, and leaving something behind for those who follow me." These can be categorized into: "family, health, community, and legacy." Now take five minutes, look at your calendar, and review the last four weeks. On a separate sheet of paper, categorize the activities and list the average hours per week you engage in the activities. For example, in an average week of 168 hours, you might spend 49 hours sleeping. You might spend 21 hours eating. You might spend 14 hours on personal hygiene and care. You might spend 40 hours working. You might spend 4 hours exercising. You might spend 4 hours running errands. This leaves 36 hours. For most of us what we do with those 36 hours is based on a sense of urgency rather than a decision about what was important. Nonetheless, categorize the activities you did for that time. Notice if any of these categories match the important categories you listed before. Start with a clean sheet and in five minutes answer the question: "What do I desire?" You should be selfish – list what you want most out of life in terms of what makes you happy or satisfied. You now have three sheets of paper and we are fifteen minutes in. One sheet lists the first important items that came to mind, one lists what you have chosen to do with your time, and one lists your desires. Is there a coherence? Do the personal values you have as to what is important match how you spend your time? Is that really what you want? A strategy helps us put these things together by documenting your careful consideration of what is important and desired to enable better day-to-day decisions about how to spend your time. In the next five minutes again write down what you think is important but also list the tasks that are required to accomplish what is important. This is a way of articulating your personal values and is a written personal strategy.

2. Relate your values and personal strategy to your business using the Prior Diligence strategy as a template. Draft a strategy for your business. Use group decision-making procedures to review the strategy with your co-owners. Agree on a business strategy with your co-owners.

3. Compute the time you have available in the average week and schedule the times you will devote to important business strategy tasks. The tasks include creating a business plan with reasonable milestones and timelines from the strategy with your co-owners.

4. Use Dynamic Planning to execute and revise the plan.

My Substack site, Owning a Business (https://rickriebesell.substack.com/) is devoted to a discussion of Prior Diligence, a strategy that is the basis for planning to accomplish the result of realizing the highest possible value from ownership of a business interest.

The components of Prior Diligence are: separation of the owner from management, the presence of co-owners, the implementation of a buy-sell agreement among the owners, a sale to an unrelated outside buyer, and management of the business with Dynamic Planning. All of these components are described with more detail in the archives of the Substack site, Owning a Business. The chat feature of the site, which I moderate, is a place of community for business owners to learn and help others solve entrepreneurial ownership problems.

Next year be the business owner who looks back and realizes that one or more important accomplishments have been reached. You used your values to create a strategy. You set a goal at the beginning of the year. You created a plan to act to accomplish the goal. You executed the plan by acting to reach the goal. The feeling will be one of satisfaction and a sense of accomplishment.

No one said it would be easy. If you are the owner of an interest in a business which has become profitable, you and your team have done something right and it probably was not easy. Moreover, it will not be easy to keep your business profitable.

What follows is a chart for the failure rate year by year from a LendingTree analysis of U.S. Bureau of Labor Statistics data (https://www.lendingtree.com/business/small/failure-rate/).

Time Frame

Percentage of Failure

Within 1 year

23.2%

After 2 years

32.8%

After 3 years

36.2%

After 4 years

43.2%

After 5 years

48.0%

After 6 years

52.9%

After 7 years

56.6%

After 8 years

59.6%

After 9 years

62.2%

After 10 years

65.3%

The five- and 10-year business failure rates respectively are that 48.0% and 65.3% of businesses fail. So even if you survive the first years and become profitable, it does not get easier. For the continuity of a business after profitability several things should align, a group decision-making process continuing to produce good decisions, owner-managers delegating management functions more and more as the business grows, and the strategy of the owners consistently being expressed in a business plan which is executed and revised on a continuum.

The longer the business operates profitably, the more it increases in value. At the point of consistent profitability the owners' strategy should focus beyond profitability to deriving the maximum value from the business. The wealth-building event that transfers the maximum value from the business risk of owning a business to the relatively lower risk of having that value in personal investment assets is a sale of the business to a third-party buyer.

The Prior Diligence strategy is the process a business owner utilizes for deriving maximum value from a business sale. It is the seller's preparation for the buyer's due diligence, which is the buyer's investigation of the business as a part of the sale process. Prior Diligence involves planning done through group decision-making by documenting in writing the decisions of a policy-making group. The plans, strategic and operational, include the setting of goals, performance measurement, and incentive systems linked to value creation. The plans are dynamic and subject to constant revision. Prior Diligence installs processes that encourage managers and employees to act to maximize the value of the business with a philosophy of managing the business to sell the business.

There are requisite components which must be in place to derive maximum value from a business interest. The owner of the business interest must perceive and anticipate the inevitable separation of the owner from the business interest. There should be co-owners who each understand the benefits of co-ownership of a business. Majority ownership control can be maintained while obtaining the benefit of group decision-making. The value of each owner's interest is insured by buy-sell provisions in an owner agreement. The value of a business interest owner to owner (fair value) should be understood to be different from the owner's share of the market value of the business. To obtain maximum value for a business there must be a sale to an unrelated third-party where no owner's participation in the business is deemed essential to the success of the business.

Accomplishing the maximum, as in being the best, is not always obtainable, but no one said it would be easy. The maximum is a worthwhile goal. What is obtained by striving for the maximum will bring better results than if the effort to obtain the maximum were not made.

No one said it would be easy. Resolve that no matter how you are separated from your business interest, the maximum possible value of that interest will go to your heirs as your legacy. If you make that resolve in good faith, you have established the first component. Keep going. If you do not have co-owners, contemplate reasonable ways to obtain co-owners without losing legal control. With your co-owners, negotiate and create a contingency succession plan with basic buy-sell provisions. Endeavor to understand and utilize the dimensions of group decision-making and how that planning activity can cause execution of planning to make the business more viable. Start discussing the value of the business and the differences that exist between the amounts owners pay one another for interests in the business and the amount an unrelated third-party might pay for the business interest.

My name is Rick Riebesell and I am principal consultant of Business Transition Consulting (https://btcllc.net) and author of the blog Business Concern (https://businessconcern.net). For a business owner wanting to implement the Prior Diligence strategy, I write a Substack called Owning a Business (https://rickriebesell.substack.com) with an archive of information about the Prior Diligence strategy and through the chat process providing a dialogue with me and other business owners about the business ownership experience. Thanks for your attention.

The idiomatic phrase – shoulda, coulda, woulda – conveys the feeling you as the owner of a business might have in three years. Ok, "Could've, Would've, Should've" is a Taylor Swift (and Aaron Dessner) song. But it derives from the phrase often written as "shoulda, coulda, woulda." The combination of the meaning of each – should conveying correctness, could conveying possibility, and would conveying a thwarted intention – yields a meaning of the uselessness of looking back or looking for excuses. Pat Riley, President and former coach of the Miami Heat and the Los Angeles Lakers famously said: "There's no such thing as coulda, shoulda, or woulda. If you shoulda and coulda, you woulda done it."

In my experience, three years is about the time it takes to prepare a business to be sold for the highest possible price. Most business owners are so concerned with the urgent matters of the business that they fail to pay attention to the important matter of assuring that the termination of their business interest results in a wealth-building event. This important strategy, which I call Prior Diligence, can result in wealth-building results but only if it is learned and utilized. I have outlined the Prior Diligence strategy in a series of posts on Substack called Owning a Business (rickriebesell.substack.com). The sooner it is implemented, the closer the wealth-building event.

If you are the owner of a business interest in a profitable small to medium sized business, your primary concern should be to realize the maximum value from that interest. To be precise, "realize maximum value" means receiving the most net cash for that interest thereby converting the value in the business interest from a high risk business ownership to a personal asset held at a relatively low investment risk. This is when the sale of a business interest is a wealth-building event.

Think down the road three years. What would it mean to be selling your business for the maximum value? For most profitable businesses it would be a wealth-building event. Think about the businesses that you are familiar with who have not been sold for maximum value but have been the subject of disputes among the owners, had an owner essential to the business leave the business, or for one reason or another been liquidated. There is a strategy to follow that in three years will have that wealth-building event more available to you. Or in three years you will be saying: "shoulda, coulda, woulda."