Shrinking the Business to Create Owner Wealth

 It’s important to provide wealth-building options to business owners throughout the planning process. The option I’m going to discuss today is one that can be difficult to approach- the concept of shrinking the business.

This path is totally counter-intuitive for the vast majority of owners. But for many smaller businesses that will have a limited value when the business is sold, a reduction in Sales can lead to a disproportionately greater increase in Expense reduction. When this is true, the consequence is an increase in cash flow beyond the requirements of the business. This cash can be distributed directly to the owners, building their personal owner value.
Seems pretty simple doesn’t it? But it can be hard to convince business owners to choose this path, even when it might be (one of) their best option(s). Looking forward to what my fellow advisors and business owners think about this in the comments.

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Posted in Blog, Exit/Succession