Business refresh – Step 2: Strategic Objective

“Your Strategic Objective is a very clear statement of what you business ultimately has to do for you to achieve your Primary Aim.’

What do I want to have done with my life?

I want to help more people to grow more things, build more things, stretch out more, achieve what they want to achieve.

I want people to be able to say ‘I thought there was no way forward until I met Sebastian’.

I want help people take the first step, the second step and more to where they want to be.

The strategic objective aligns with the business with achieving my primary aim

The business should:

• enable me to build things for clients with vision
• grow people within my organisation to realise their dreams
• generate a profit and become more valuable over time
• operate within the limitations of sustainable living on this planet

The e-myth book then sets out some standards

How much do I want this business to be worth?

Let’s say that I want to be able to live comfortably and continue my primary aim indefinitely.

$250k per year in income would be about right.

Assuming 5% investment income per year, the sale of the business would have to create a capital gain of $5 million for me to generate $250k in capital income per year.

The $5 million would be post-tax so add the marginal tax rate of 25% on top and my share of the business has to sell for $6.5 million.

Therefore, the target sale price of my share of a business is $6.5 million.

What is the opportunity?

The three opportunities:

1. Project advisory (consulting)
2. Hydroponics
3. Asset management

Opp.	What business am I in?	Who is my customer?	How many customers are there?	What is their pain point?	Lower price limit	Upper price limit
1	Project advisory	Project developers	(TBC)	Projects have to compete for funding on viability and impact – need to meet information requirements and be innovative	Minimum compliance	Risk-adjusted % of total project
2	Hydroponics	Homeowners	All homeowners – 6.4 million	People want to grow high quality, abundant, organic food in their own home	Cost of purchasing food	Value of giving food for friends and family
3	Asset management	Investors	Australian millionaires – 2.1 million	They want to generate sufficient returns and potentially have impact	Alternative providers	Percentage of returns and impact

The analysis of the different businesses shows the financials required to generate the target sale price of $6.5 million assuming the same exit multiples for businesses with less $20 million in revenue.

Some takeaways:

• For an advisory firm billing an average of $220 per hour and aiming for 80% utilisation (1,800 hours per year), the form would need 25 paid consultants (plus support staff)
• For an asset manager, the managers would need to manage at $1.2 billion in funds under management given average fees are 0.87% per FUM. Additional revenue could come from overperformance but not included as a revenue stream here.
• The hydroponics business would have to sell and install almost 1,500 systems per year (or 6 system per business day) at $10,000 per system to generate the required revenue

These are all big numbers.

• For the advisory service, it would need to win more than $10million per year from target clients?
• For the fund management group, what is the likelihood of capturing $1.2 billion in FUM?
• For the hydroponics business, could it sell and install 1,500 systems per year while servicing the 1,500 new systems per year?

These are implementation questions about the business’s marketing, business processes and capital investment strategy.