02. How to Be a Value Creator: Building a Business That Works for You

In the previous article, we talked about the two owner mindsets:
Income Owners — who focus on generating cash flow today.
Value Creators — who build wealth through their business.

As a Value Creator, you are building a business that works for you… not the other way around.  Your business can create wealth for you and your family beyond just the cash you could pull out of the company.

Wealth = Financial and personal independence. Period.

Value Creators typically have 70–90% of their net worth tied to the business. Our clients sell for between $20 million and $100 million. That’s US dollars! Hard cash! I don’t know about you, but those are very meaningful numbers to pretty much everyone I’ve met.

So, let’s dig in to begin understanding what it takes to actually be able to reap the big payday.

1. Know What Makes a Company Valuable

Most owners spend years generating revenue but never build value.

Business revenue pays the bills.
Valuable companies build wealth.

The key difference? Transferability. We’ll spend a lot more time on this in a later article, but it is key to demonstrate you are a Value Creator.

Forget what your balance sheet or your accountant tells you. If you can’t transfer it…there is no value to anyone other than its intrinsic worth to you. If your business can’t run, grow, and make money without you, it’s not an asset — it’s a job with overhead.

Value Creators build companies that (other than major strategic decisions) can operate independently of them.

2. Think in Multiples, Not Cash Flow

The math for your company’s value is EBITDA x Your Multiple. Your EBITDA (earnings before interest, taxes, depreciation and amortization) is easy to understand. The multiple is a mathematical expression of the worth of future cash flows your business can produce for someone else.

The expectation is that your business could generate those future cash flows without you, which is what makes you a Value Creator.

Multiples vary not only by industry but also widely within an industry. For example, you may have heard companies in your industry sell between 4-6 times EBITDA. Most businesses in such an industry probably sell below that average range. However, really well-prepared companies would sell for more than the high end of the average range. That translates to millions and millions of dollars for you and your family.

To be a Value Creator, you need to be making the right investments in your business that will continue to grow your EBITDA and improve how your business operates in order to enhance your Multiple.

Value Creators don’t ask, “How much did I make this year?”
They ask, “How much did I increase the Value of my business?”

If you increase EBITDA by $1M and your valuation multiple is 5x, you just created $5M in value. That’s being a Value Creator. Not just income, but wealth expansion.

We will go into greater detail later as to what drives multiples in your industry.

3. Plan Your Exit Before It Finds You

Every business will change hands — by sale, succession, or circumstance.

Value Creators build companies that can be transferred to someone else (more on options later). Because the truth is, at some point, you won’t own your business anymore. How and when that happens may be your choice based on careful planning, or it may happen when you least expect it due to:

• unforeseen personal circumstances
• a buyer with an offer you seemingly can’t refuse

Value Creators think ahead. They develop personal and business plans to be sure they can achieve their goals either on their timeline or when situations change. They’re not running from the business — they’re planning their independence.

Closing Thought

Income Owners work in their business.
Value Creators work on it.

One earns money.
The other earns freedom.

In the next article, we’ll outline the steps it takes to be sure you and your business are on your way to solidifying your reputation as a Value Creator with the Value Creation Framework.