This is an abbreviated version of Carl Sheeler's Pulse blog on Linkedin, 'What is your risk vs. opportunity optics?' The purpose of this material on Optics and the presentation about the 'Business Owner Paradox are inter-related.

1. Optics: Yours & Theirs
WHOSE VIEW OF RISK VS. OPPORTUNITY IS AT WORK ?
Carl Sheeler, PhD ASA, CBA, CVA
Managing Director, Berkeley Research Group,
Family Offices & Businesses
When & where it counts, you can have less risk, greater mutliples, higher value

2. Why Optics Are Important?
If there is a series of transactions of stock between sellers and buyers
("investors") there are two unique things occurring.
The buyer believes there is upside potential unique to the specific
investment. The seller believes that liquidity or an alternative investment is
preferred.
Can both views be right?

3. Business owner risk
Along with opportunity comes risk. We own the choices. While many people
wish to become entrepreneurs, fewer actually do.
A few more have created a job and some degree of independence, but not
much else. The pyramid getting from $1 million to $5 million in annual sales,
narrows. From $10 million to $25 million in sales, it narrows more with those
achieving $50 million and above are rare.
They have mastered not just their product and service offerings, but have been
adept at managing both their financial and human capital as well as risk.
You too can learn to leverage HUMAN capital along with financial capital and
manage or mitigate risks.

4. Aversion to your risk
Let's consider the choices of others, namely of advisors, trustees and their firms.
They don't see your risk as you do. In fact, most are adverse to it. Their preference
is a sale of your business. It's easier for them. There is less complexity and their
skills are not adequate to work with your business or your risk.
A variety of views attempt to justify this. They include:
Selling is necessary to diversify a concentrated equity asset.
Selling is necessary to dilute equity value ( considering it to be a "risk")
It's easier to sell and divide up proceeds so heirs can make their own choices.
None of these demonstrate awareness of risk "in" the asset. .
Optics, therefore when not aligned to a common end game will warp outcomes in
ways you may not want or intend. So lets be clear before you get started, What
should your endgame look like and what will be the role of your business in it?"
We are being simple for illustration purposes.

5. The solution
FINANCE & HUMAN CAPITAL skills, experienced in identifying, measuring and
offering options to either manage or mitigate risk "in" the asset. Why? Less risk,
the greater the multiple, the higher the value.
As a result, the business can be held by more advisors, financial firms and trust
companies when there is an external risk management program in place.
There are a variety of ways of making this possible in conjunction with firms,
including reporting on shareholder value. This is the best of both worlds for
owner, for family wealth and for the financial firm.
For more information, contact Robin or Carl.
Strong Finance skills are needed

6. What this means
The founder chooses what they will be paid in salary and profits for time, ability and
risk assumed versus what will be reinvested to grow the company for a
deferred reward of a higher value.
Most owners would be surprised to learn that if the company fails to have an
adequate amount of capital reinvested, this is a primary reason for the business being
stuck at $5 or $10 million in sales.
Yet with the right tools and learning, value can be many fold greater due to
compounding in as short as 10 years.

7. Optics at work
When an advisor works at a financial institution, law or accounting firm and suggests
to an entrepreneur they should mitigate risk, the real question becomes risk as
opposed to what?
The common answer is diversification and often this means publicly traded securities.
This might result in less risk and more liquidity, but it does also mean less control.
This is why many owners are hard pressed to act on such advice in a big way.
Many owners know when an advisor doesn't have shared skin in his game. An advisor
believes skin in the game happens when the owner, prospect or client acti upon the
suggestions offered.
Financial, Law or Accounting

8. Second example of optics
How does this influence risk of the performing asset such as an operating
business or real property holdings?
If an accountant or tax partner could learn about risk and spend more time on
entrepreneurship, legacy, leverage and learning, would this be a most attractive
and value-add relationship?
An accountant may focus on the "risks" of taxes

9. Issues of asset protection are tabled as a way to preserve principal. Again, the
common end game tends to migrate to liquidity and diversification.
If an owner is pocketing $2.5 million annually and spending $2 million annually and
then sells the asset for $20 million net and can expect 4% after tax, this produces
$800,000 in annual spendable funds.
Unless the prospect/client expects to reduce his expenditures by $1.2 million a year,
the viability of protecting principal is an artificial construct.
Third example of optics
Asset protection to preserve principal

10. Trusted advisor optics
The asset would have to net at least $50 million to generate the $2 million
annual spend (pre-tax).
If the prospect/client relies upon trusted advisors who are unable, unaware or
unwilling to assist in enhancing business value by another $30 million, is their
idea of "risk" aligned with that of the person they're seeking to serve?
IF not, would you or your trusted advisor know where to turn and what
questions to ask?

11. The uncommon solution
based in finance
If the client "knew" that services rendered would be billed for at $300,000 or
even $1,000,000 but would produce the $30 million increase with a return of
100x or even 30x on fees expended would they agree to doing so?

12. "Out-of-the-box" solutions along
with an uncommon solution
Options may include hiring an industry executive to have a salary plus participation in
profit and/or value growth.
It might mean hiring an MBA student as an intern to learn the industry while the MBA
educates the founder on best practices.
It might mean grooming key staff for more important roles.
It might mean selling a minority interest to a private equity firm that has the
funds. personnel and contacts unique to the industry.

13. Entrepreneur knows there are risks with seizing opportunities.
Perhaps the question is how do advisors prove their mettle to be more worthy
of the services they wish to provide. Is there a distinction between the
solutions they offer that reflects a track-record of helping past clients grow
their businesses to 8- and 9-figures or more?
The challenge for the business and entrepreneur is the human capital which
calls for having a legitimate strategy (versus tactics) to leverage uncommon
knowledge and relationships to influence risk. (The lower the risk, the greater
the multiple and closer to the $50 million target in the example above. More
to the point financial capital alone won't buy its way to the target without a
merger or acquisition or a holistic approach to harness the human capital of
advisors, owners, staff and other stakeholders.)
Entrepreneurs know there
are risks

14. Invest in Your Future
Let's begin today as your lifestyle & legacy are too
important to leave to misaligned optics.
Carl Sheeler, PhD, ASA, CBA, CVA
2049 Century Park East, Suite 2525
Los Angeles, CA 90067
Phone: 1-310-499-4842 CA
1-646-328-1981 NY
Email: carl@prcio.com or
csheeler@thinkbrg.com
Robin Coady Smith
1330 Avenue of the Americas, 23rd Fl
New York, NY 10019
Phone: 1-646-328-1982
Email: robin@prcio.com