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Golden egg syndrome: why business owners take risk by not taking risks

- John Mickelson is managing partner at Midwest Growth Partners.

We often see business owners who already have a good business with the potential to have a great business. These owners have well thought out ideas to make their company even bigger and better.

When we ask why they haven’t done so yet, it becomes clear that in their mind the risk is not worth the reward. There is a fear of losing the steady level of success the business has been achieving, which we call the “golden egg syndrome.”

The golden egg syndrome is frequently found with more senior business owners who do not want to risk substantial capital at this stage in their career. It is also found in family owned businesses that do not want to fundamentally change the way their business has operated for many years.

Unfortunately, becoming stagnant over time is one way to quickly lose market share to your competitors and not leave as big of a legacy to your heirs.  It places the company and, by default, remaining employees, at a strategic disadvantage for the day when the owner is gone. 

Private equity can be a great solution for the golden egg syndrome. By selling a portion of a business, but continuing to own some and operate it day-to-day, business owners can achieve some personal liquidity and diversify their wealth.

The business owner then gets to share the capital risk of prudent investments for the company designed to grow their business with the private equity fund. Business owners also get experienced partners who can help guide them in making strategic decisions.

Finally, the private equity fund will be able to help facilitate succession planning – both with management and with remaining ownership – when that time is right. 

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