How selling 2/3 of your family business and reinvesting 1/3 doubles your fortune in 5 years?
In the world of entrepreneurship, where the heart of innovation beats fervently, there lies an often-overlooked strategy that can turn the tides of fortune for family business owners.
Miguel Meuleman, a revered professor of Entrepreneurship at the Vlerick Entrepreneurship Academy, has long championed the pivotal role of ownership strategy in crafting the success stories of tomorrow's businesses. Yet, it's a principle that, despite its profound potential, remains underappreciated in the bustling arena of business growth.
Let's delve into a compelling narrative that not only echoes Professor Meuleman's insights but also brings to light a concrete example that vividly illustrates the transformative power of strategic ownership realignment.
Entrepreneurs who relinquish control in favor of external capital create more valuable companies on average. Giving up control is not only about ownership, however, but also about changing your role in the company by bringing in an external CEO or taking a step back from the board of directors.
Selling two-thirds of the business and reinvesting just one-third.
Imagine a family-owned enterprise, a jewel passed down through generations, standing at a crossroads. The business, valued at €10 million, has been the family's pride, growing steadily at average 7% annually. However, in the shadows of this growth, lies the untapped potential for exponential wealth maximization—a potential unlocked through a bold, strategic manoeuvre: selling two-thirds of the business and reinvesting just one-third.
Here's the journey of an entrepreneur who dared to reimagine the future of their family business. By engaging in a leveraged buy-in management buy-out (BIMBO), the entrepreneur decides to sell a significant portion of the business, retaining a 33% stake. The proceeds from this sale, apart from the reinvestment, are strategically funneled into purchasing shares of Berkshire Hathaway, leveraging a 40% limited margin account to amplify the investment.
Although the percentage of shares you own is lower, that proportion is worth more in absolute terms than for entrepreneurs who do not cede control.
Surpassing the traditional growth boundaries
Fast forward five years, and the landscape of the entrepreneur's wealth has been dramatically reshaped. The family business, now infused with external capital and expertise, thrives, surpassing the traditional growth boundaries. Meanwhile, the investment in Berkshire Hathaway, flourishing at a stunning 88.89 % return over five years, compounds the entrepreneur's wealth even further.
The entrepreneur's decision to sell two-thirds of their kingdom was not a surrender but a masterstroke of strategic foresight. By reinvesting one-third of the proceeds back into the business, they not only ensured their continued stake in the family legacy but also embraced the opportunity for diversification and risk management through an astute investment strategy.
But this story doesn't just end with numerical growth. It's a tale of how strategic financial planning and ownership restructuring can breathe new life into a family legacy. It's about understanding that sometimes, to climb higher, one must let go, not of the vision, but of the reins, allowing external expertise and capital to catalyze growth.
The entrepreneur's decision to sell two-thirds of their kingdom was not a surrender but a masterstroke of strategic foresight. By reinvesting one-third of the proceeds back into the business, they not only ensured their continued stake in the family legacy but also embraced the opportunity for diversification and risk management through an astute investment strategy.
This narrative transcends the traditional confines of family business ownership, offering a compelling blueprint for wealth maximization.
It's a testament to the synergy between relinquishing control and embracing strategic partnerships, between preserving a legacy and paving the way for unprecedented growth.
As this story unfolds in this publication, it stands as a beacon for most entrepreneurs. It challenges them to rethink their ownership strategies, to consider the untapped potential of strategic realignment, and to boldly bridge the worlds of tradition and innovation. In doing so, it not only reaffirms Professor Meuleman's insights but also showcases a tangible path to doubling one's fortune, all while keeping the family flag flying high.
In essence, this is not just a story of financial success; it's a narrative about the evolution of entrepreneurship itself. It underscores the critical role of ownership strategy in the success and growth of a business, enriched by a concrete example that demystifies the concept, making it accessible and actionable for every entrepreneur looking to leave a mark on the future.
My message is above all to think about this enough, and often enough. What is the right ownership strategy for your company, given your personal ambitions and the challenges that may exist in the sector?
Summary: A Strategic Blueprint for Prosperity
In essence, this isn't merely a success story—it's a blueprint for prosperity. A detailed examination reveals that an ownership strategy fine-tuned to the unique ambitions and challenges of your sector can result in profound wealth creation. The difference is night and day: €14,025,517 reflects growth without strategy, but with a strategic pivot, a fortune grows to an extraordinary €28,978,117.
The crux of the matter lies in the strategic handling of assets. Without a nuanced ownership strategy, family business are deprived of liquid assets, a critical factor that limits their capacity to seize emerging, profitable opportunities. This could range from high-return short-term investments to emergency expenditures, or time-sensitive deals. As a result, their financial growth stagnates, epitomized by the plateau at €14,025,517- a figure that represents the ceiling of achievement in the absence of a deliberate approach-.
Conversely, by judiciously maintaining at least over half of their wealth in liquid form, and by proceeding to partial exit they place themselves at the vanguard of opportunity. This readiness to engage with investments, to adeptly respond to market fluctuations, or to dive into unexpected ventures with both agility and precision, is the cornerstone of strategic liquidity. Such an approach not only averts the pitfalls of missed opportunities but plays a pivotal role in the remarkable escalation of wealth to €28,978,117.
We welcome our readers to embark on this journey of financial alchemy, to request the Excel model that articulates this approach, and to adapt it to their personal narrative of success.
Your invitation to redefine your family's legacy and wealth awaits. Contact us to acquire the model that could set you on the path to doubling your fortune.