Do You Have a Lifestyle Company?

By Sage Duvall

Aug 13 2019


This is a guest article from Founders Advisors Managing Director Mike McCraw. We hope you enjoy it!

A lifestyle company is a business operated with the purpose of providing a level of income or particular lifestyle for its Founder. There is nothing wrong with having a lifestyle company, but the founder/entrepreneur must understand that the “lifestyle company” mentality does not fully align with building enterprise value or creation of a sellable company.  Again, nothing wrong with either approach, but make sure you understand the pluses and minuses and that your choices are intentional.

A lifestyle company might be sellable, but below are some “lifestyle company” choices that could negatively impact your ability to sell your company and/or achieve maximum value:

  1. Your business would not be sustainable without you. You have not developed a solid team or business processes that would allow the business to move forward without your involvement.  
  1. You’ve not properly managed your financial accounting. When making financial decisions and preparing annual financials, you’re more focused on limiting your annual tax burden than increasing revenue.
  1. You manage your company year to year with little to no long-term planning. At the end of the year, you are thankful to have made it through another year and do not strategically plan for the next one, five, or ten years.  
  1. You don’t invest in the future growth of your business. You are not seeking to grow your business or not willing to make the investments necessary to do so.  You draw and spend all profits and do not reinvest into the business.
  1. You mix personal and company assets. Examples of this include: your company paying a relative that does not contribute much/any to operations or your company owns a recreational property (beach condo, hunting club, etc.).

The way you run your business leads to a certain destination. The destination is not the problem; the problem is arriving at a destination that you didn’t want or didn’t intend. To learn more about what will diminish and more importantly what will create significant enterprise value in your business, contact Mike McCraw with Strategic Advisory Practice at mmccraw@foundersib.com.

About Founders Investment Banking, LLC.

Founders Investment Banking (Founders) is a merger, acquisition & strategic advisory firm serving middle-market companies. Founders’ focus is on oil and gas, SaaS/software, industrials, internet, digital media and industrial technology companies located nationwide, as well as companies based in the Southeast across a variety of industries. Founders’ skilled professionals, proven expertise and process-based solutions help companies access growth capital, make acquisitions, and/or prepare for and execute liquidity events to achieve specific financial goals. In order to provide securities-related services discussed herein, certain principals of Founders are licensed with M & A Securities Group, Inc. or Founders M&A Advisory, LLC, both members of member FINRA & SiPC. M&A Securities Group and Founders are unaffiliated entities. Founders M&A Advisory is a wholly-owned subsidiary of Founders.

For more information, visit www.foundersib.com.


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