What is equity? The definition of business equity is to subtract your liabilities from your assets and what is left is the owners equity. So presumably, if you are making money, you are building equity.

There is another way to think of equity and that is to determine what a business is worth. It may be different than the simple process of subtracting the liabilities from the assets. In this case your value or equity might be what someone is willing to pay for your business.

This is often determined by how well the business is running. How profitable is the business? How well does it operate? Will it run without the current owner being involved? Are there systems in place to assure that operations will continue, uninterrupted if the owner is not involved? There are of course more financial ratios that must be explored like the debt to equity ratio and the return on equity, but let’s take a different look for this article.

Most business owners start without a clear vision of what they’re trying to create. What they end up creating is a job. They really haven’t thought about how their business will serve their life. Consequently their business ends up running their life.

You must start out with a clear vision of what you want for your life. What kind of life do you want to live?

Do you want to spend 60 or 70 hours a week in your business? Do you want to worry about having enough business or enough money to meet payroll, etc. Unless you lay out a clear vision, you will end up with a business failure or a business that controls your life.

You need to start with a vision which includes an exit strategy. The only reason to start your own business is to sell it or pass it along to your heirs. At what point would you want to sell or pass the business along to your heirs? Do you want to be in business for 5,10 or 20 years? In order to sell it or pass it along to your heirs, it must operate without you. This means creating good systems.

How big do you want your business to be? Do your market research. Is this a viable business? Is there a market for your product or service? Will you need employees? How will you hire and train them? What kind of systems will you need to have in place to assure that your business performs up to your expectations?

It take a bit of planning to create a real business instead of just a job. Take time to do your homework and you’ll be miles ahead of your competition.

What if you already have a business and you find that it is running your life? You need to take time to re-evaluate where you are. Use the same process to create your vision and follow through. You can always change direction and get more of what you want.

I would like to invite you to visit my website http://www.my-small-business-success.com where you will have access to a FREE Small Business Assessment and a 1/2 hour FREE Consultation.

My name is John C. Bergman and I have been consulting for small to medium sized businesses for over two decades.

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