They say March comes in like a lion, and out like a
lamb. And we seamlessly slide into
spring, with balmy afternoons, and perhaps the temptation of an afternoon out
of the office. After all, winter has
been pure drudgery, nose to the grindstone, and a break is well deserved,
right? Well perhaps, if you appreciate
the benefits, and understand the trade-off that comes with a well earned
perk.
Owning your own business means you can make all your own
choices, and create the environment you want.
You also create the long-term company value you want as well.
Perks like Friday afternoons at the golf course or at the
marina feel like rewards because they are valuable to you. And having the luxury of arranging more of
these afternoons becomes even more valuable over time. And eventually, it’s
every Friday. After a while, this
freedom and flexibility feels like an entitlement of ownership. And why not, you worked hard, and you own the
place.
But be aware, this valuable new flexibility has a price: Lifestyle Value.
You may have friends who have built lifestyle businesses,
often sole practitioner professional services where revenue generation equals the
owner’s living expenses, with minimal equity value accumulated over time. These lifestyle businesses are designed from
the outset (whether consciously or sub-consciously) to be enterprises with value
that is only as great as the boundaries of the owner’s lifestyle needs and
abilities to provide a service.
But that is not what Lifestyle Value is about. Rather, it’s about the little perks, or
choices you make which marginalize the value of the business. Think of it this
way. Your company’s value is like a pie, and each time you make a ‘perk’
choice, you are increasing the Lifestyle Value piece of the pie. The downside
is you are decreasing the other slices, namely the business or investment value of
the company.
Occasionally, opting to capture some R&R reflects solid
work/life balance, and personal priorities. But, if you intend to sell your
business to a third party, especially in the next 2-3 years, be aware that this
Lifestyle Value is non-transferable. Just like an airline ticket, there is no buyer
or market for your seat because the ticket’s value cannot be exchanged.
Often Lifestyle Value accumulation is insidious.
It creeps up, and creeps up until one day you look around
and realize you, and maybe the business, are coasting. And all the value you created has flat lined. Rather than invest, and take risks, you have
been opting for rewards; perks replaced performance as your metric of
success.
Here are 3 signs you
may be at risk for Lifestyle Creep:
1.
Time away from the business is driven by a
desire to ‘escape’, and avoid the difficult decisions and challenges associated
with continual reinvestment in the company future.
2.
Life is too short attitude, taken to an extreme,
such that you use an increasing portion of your thinking time planning personal
pursuits vs company initiatives.
3.
Coasting has become status quo- for your key
managers. Your team follows your lead,
so if you see them coasting, you may be coasting yourself more than you
realize, and you may have established that as the new pace of the organization.
If you do see signs of Lifestyle Creep, think about the value
implications. You can choose to redirect your energy, and
get back on the value building path.
Or maybe it’s time to consider planning your exit before too
much non-transferable Lifestyle Value has been accumulated. After all, you don’t want to be stuck with a worthless,
non-refundable ticket.
What do you think? I am
interested in your thoughts about where the line between reasonable perks and
Lifestyle Creep lies and how we can all be more aware of the early warning
signs. Please post your comments and questions below.
