Grow and Keep Your Small Business!

Sometimes economic developers focus on getting large corporations to come to town and provide jobs. Startups are also encouraged to create jobs. Economic developers sometimes do this while ignoring the jobs created and sustained by existing small businesses.

Is it fair to provide an incentive to a new competitor and do nothing for the business that has been here contributing to employment and the community for 20 years?

No, it’s not fair.

The good news is that more and more regions are waking up to the reality that supporting the existing businesses – ‘business retention and expansion’ (BR&E) is not only fair but productive.  These incentives are one reason to keep your small business.

The alternative – Selling your business

First – you need a buyer. In order to make your business more valuable, you need to ensure it is efficient and profitable. If you want to leave the business after you sell it, you need to ‘replace yourself’ so the business is not dependent on you.

Second – you need to replace the income stream from the business.  For each dollar you get from the sale, there would be tax to pay on the gain and then you could invest the rest and get say – 6% on your money?  For every dollar you received on the sale, it might be 75 cents after tax and then it would produce 6% of that in income – A business sold for one million dollars cash may produce $42,000 per year in replacement income.

Third – what about the perks? If you sell your business, you have to pay for everything you need out of your own money! Business meals, cell phones, vehicles and vacations all have to come out of the income from the investments, and now you have to pay tax on the income first!

I have a better idea – Why not invest in your existing business and make it more profitable, replace yourself in the business and then keep it!

I have clients that have done this and it works very well. One of the unexpected benefits of working on replacing yourself in your business – the profits usually increase as well!

I’m not saying it’s easy, but it’s easier than finding someone to fork over enough money for you to maintain the same lifestyle from investments that you are currently enjoying from your business!

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Author: Paul Foster
Paul's life’s purpose is to bring more cash, freedom and happiness to independent business owners. Paul wants to learn about your toughest business challenges and frustrations so he can help you tackle them.

1 Comment

  • I agree with your post on two levels: micro and macro.

    On the micro level, for an individual business owner, it’s not always clear that selling the company is the right thing to do. It depends on a wide variety of factors, as you pointed out. Unless you have a better alternative on the table, it often only makes sense to sell only if you have to, say for health reasons, for example.

    On the macro level, I agree that governments should nurture the small businesses they have in place. That’s not to say that they shouldn’t seek to attract new companies to the area; they should. It is to say though, that just as treating current customers well usually is much more profitable than over-spending in hopes of finding new ones, it’s worthwhile to put focus and thought into how to help your current “installed base” of small businesses contribute more to the local economy.

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