Being the owner of a business encompasses certain rights, responsibilities, and risks, which extend beyond those of the non-owner “management ” of the business. This is particularly the case for a founding business owner who invested and risked personal capital for the firm to survive, operate, and grow.
In exchange for risking capital, the entrepreneurial business owner has the right to receive dividends and other forms of owner disbursements, and to hire management (who may or may not be owners) to run and make decisions about the daily operation of the company.
However, the entrepreneurship of the founding business owner extends beyond the financial capital aspects. In looking at this broader dimension to original, formative ownership, the definition of “capital” also includes providing basic fundamentals such as why the business was started, what’s its mission, and what are its core values and ethics.
This all begins with the personality of the founder, but as the business evolves, it embeds a certain “culture” which serves as the foundation. In a narrowly owned, private business this is very different from the experience of share ownership in more widely owned, public company where for the motivation for shareholders is more that of investor than owner.
The founding business owner often transitions through different degrees of ownership from starting as a fully immersed, centralized, hands-on operating owner to becoming a passive owner who collects dividends and other forms of owner disbursements, but abdicates to others the responsibilities for operating the business.
The unique transitional business challenges experienced by a founder are financially and emotionally challenging, and are often underestimated and under-appreciated by others employed inside the business as well as by outside professionals who pitch to advise, but have never owned a business.
In business, it’s not only about growing gross revenues, it’s also about the bottom line after taxes and fees that’s important. For a founding business owner, keeping as much of your risked and hard-earned money as possible is paramount.
Developing an overall wealth management plan that coordinates both business and personal financial strategies involves some of the most important decisions you’ll ever make.
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