Prepare Your Business

Prepare Your Business as it is Your Most Dangerous and Rewarding Asset

Structure your Business now for a successful exit or risk it crashing

Imagine you and your family are about to take a flight for a long delayed holiday.  As you sit buckled in your seats while final boarding completes, the Captain makes an announcement:

Prepare your business like Pilots in Cockpit going through checklist before taking off

“Ladies and Gentleman, thank you for flying Entrepreneur Air. I am your captain and I have over 20 years of flight experience and my co pilot has been able to get 10 years of experience in while still waiting for his license. We have a full flight but we plan to fly fast and far and we will not be using any instruments or measurements on this flight because they are distracting. Rest assured, my eyesight and instincts are perfect, I know what I am doing, my passengers love me and I know many of them all by a first name basis.”  So please sit back, relax and enjoy the flight…”

Would you stay on this airplane??

If not, why? The pilot is after all experienced, confident and his passengers tend to love him.

What would it take to keep you on the plane? Would you leave right away or wait and debate and hope the doors do not close before you decide?

The answer is obvious.  Without instruments to measure the basics (altitude, speed) and direction, there is a large probability that the plane will get lost or crash.

two pilots flying and smiling to camera while in the windshield you see another airplane about to crash into them headon. Caption says running a business oblivious to its value and key drivers...
Running a business oblivious to its value and key drivers….

Your Business Is Your Airplane

Just as an airplane that can only take off and not be able to land would be an absolutely worthless asset, so is running a business with no plan or preparation for how you will capture the value of what you built (i.e. land it).

An airplane is a deadly and dangerous asset – when not properly built, maintained, and operated. And yet we take multiple flights to distant destinations, every time putting our life and that of our family in the hands of thousands of strangers. We do so because we trust that it has been built, maintained and operated to an excellent standard.  The proof is in the statistics which provide us comfort in knowing that every aspect of air travel is heavily measured and monitored, and enhancements made when necessary.

In 2019, “There was one fatal accident involving large commercial passenger planes for every 5.58 million flights

BBC 2 January 2020.

Let’s compare passenger flights to private businesses. Below is a graph from the US Labour Department of the survival rates of companies that started in March 2000 and how they survived year by year.

Column Chart of Companies that started in Year 2000 and what percent of those survived every year until 2020. in 2001, 78.4% survived and by 2005 51.8% had closed. By 2020 only 20.8% of companies started in 2000 were still in operation
(source data:

In 2019 there were an estimated 25,900 commerical aircraft in service.  If airplanes performed the same as private businesses, we would expect to see over the next few years:

Two line graphs with a red line showing crashes and blue line showing surviving airplanes. hyptogehtical graph to show how many airplanes would crash if every crash was at same rate as a business failing. IN just 11 years graph shows 17,820 planes crashed and only 8,081 from original cohort still flying.
Thankfully air travel is significantly safer then running a private business.

So What Makes Your Private Business both a Unique and Dangerous Asset

These main factors make your business a unique but dangerous asset.

1. Largest Asset

Two line graphs representing VAlue and Risk over time. It begins with value higher then risk until age 56 when risk becomes greater than value.  at the Inflection point is the Optimal exit.
  1. Often Your Business is your Largest Asset
    1. The Asset where most of your wealth is tied up.
    1. Danger: As you get older and time goes on, having your wealth concentrated in this one asset increases the risk to your financial future especially if you pass the point of optimal exit.

2. Riskiest Asset

Line graph showing traditional cost of capital required rate of returns for different asset classes. USA investment grade bonds lowest risk at 0.2 percent while small private companies are the highest at 25 percent. graph shows a red line for rate of return rising from 0.2 to 25 percent over different asset classes.
  1. Often the Riskiest Asset in your Portfolio
    1. Smaller size and lack of access to significant capital or multiple sources of capital.
    1. Limited Management
    2. Significant or Over-Reliance on the Owner, Key Customers, Suppliers, or Employees
    3. Perceived Investor Risk of 20%+ or greater and often 30% or 40%. A very aggressive rate of return required.

3. Most Illiquid Asset

Exit timer is bar graph starting in 2020 and ending in 2029 showing time span to sell the business from today. it shows 5 more years running business then a year to negotiate and 3 year earnout so exit occurring in 2029.
  1. Often the Most Illiquid Investment in your Portfolio
    1. No public Market or Exchange to Sell Private Company.
    1. Nearly Impossible to Sell on Short Notice and Can Take up to a Year to Close a Deal (if happens to actually occur)
    2. Often not Prepared to be Successfully Sold or Transferred.  M&A Professionals on average Reject 65-75% Potential Deals out of Hand
    3. Can be expensive to sell (transaction, accounting and legal costs, etc)
    4. Too reliant on owner and so significant earnout or other restrictions put in place
    5. Even more Complexities If multiple owners or shareholders Involved and Transfer Restrictions in Place.
    6. Timing might be bad

The danger is obvious.  Your private business can easily be your riskiest asset and the most difficult to exit when needed.  The odds are against you and most likely you will be enslaved to the fortunes of your company. This becomes much more likely if you do not know the value of your business nor measure how you are performing against the key drivers of its value.

In short, unless you prepare from now, you will be flying your business like our pilot, flying by gut and instinct without recourse to instruments and gauges. Lose an engine..(i.e. an unexpected calamity).. and your chance to land (capture the value of your business with a successful exit) go close to zero.


The Sophiall Solution with our four phase plan is geared toward transforming your most dangerous asset to your most rewarding asset. We guide you in identifying, measuring and enhancing the key value drivers of your business. You will eventually gain a business that can even thrive without you, freeing you to invest your time and effort where you choose; and ultimately the peace of mind in being able to exit at a time and on terms of your choosing.

airplane flying high over the clouds with the sun in the distance. Feeling of soaring and flying high.

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